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Small cap stocks in ‘early innings’ of record run, Wall Street veteran says

The small cap Russell 2000 index is ripping to fresh records, while the overall stock market continues to struggle.

B. Riley FBR's Art Hogan predicted recently that trend will dominate in the coming months. He has a year-end price target of 1800 on the Russell 2000, a 16 percent surge from where the index began the year.

"We're in early innings of this run," the firm's chief market strategist said recently on CNBC's "Trading Nation." He added: "This is a trade that's got legs."

Hogan believes small caps are better positioned to weather a strong dollar, and fallout from the Trump administration's controversial trade policies. Plus, he noted the group benefits more directly from lower effective tax rates enacted last year than its larger peers.

"The Russell 2000 is probably going to be a better place to be than the S&P [this year]," he said.

The Russell 2000 closed at a record high of 1,626.63 on Friday, extending its win streak to three days. It came as the S&P 500 saw its third negative week in four.

"We're starting to notice that it's making record highs, but it's underperformed over the last two years," Hogan added. "We have more ground to make up."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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