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.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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