Saturday, May 10, 2014

Small caps retreat

The favorite here over the last five years has been small cap stocks, the indexes and the unique choices both included here.  Now there is finally some withdrawal, not that it is wanted.  The Russell 2000, a small cap index, is down 7.4% from its peak a few weeks ago while the Russell 1000, mostly large caps, is down comparably just 1.3%.

The bet here is still on the small caps, but wary of small cap techs and biotechs.  There has been too much hype and hubris in that sector, but home runs will still be hit and keep investors engaged.  Long shots will be propped up.  Long shots will lose money.  One win could erase all losses for hedge funders, so they stay in the game, as do the writer.

Small caps apart from tech and biotech have continuing promise.  Any diversified portfolio needs a healthy dose of a total market or extended market index when looking at the long term.  Hopefully I am not wrong.


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