Microcap stock mania to start 2021 is a signal of more gains, and potential danger, ahead

Share
The Charging Bull bronze sculpture located on Broadway at the Financial District of Manhattan.
Nicolas Economou | NurPhoto | Getty Images

The search for market excesses can probably start small – in fact with the smallest stocks that have seen outsized gains so far in 2021 as well as record trading volumes.

Already in 2021, companies with a market capitalization between $50 million and $300 million, as measured by the Russell Microcap index, are on a tear. The group has risen just shy of 10% with January only half over, part of a 12-month trend that has seen the gauge soar 31%.

In fact, the gains so far this year have set a record for the index that goes back to 2007.

More In Investing trends

CNBC Pro Powell rekindles the inflation trade with comments. Here’s what’s working in sell-off
CNBC ProAs Nasdaq goes negative for the year, watch out if you own these high-multiple shares
CNBC ProThese cheap stocks do well under low or high rates, Morgan Stanley says