2 Small-Cap Stocks to Watch in 2021

Markets may have found new leaders with some of the smallest companies on Wall Street.

Russell 2000, a small-cap target, is up more than 8% YTD, well above the 1% growth of S&P 500, which includes the shares of the largest companies by value. High hopes for the coming Biden administration and further financial relief contributed to the growth of the small capital group,  viewed from the point of view more attentive attitude to the real economy.

«The number one reason for the rise of small companies is the president-elect Joe Biden. Mr. Biden introduced himself as president Main Street», – told CNBC on Tuesday «Trading Nation» Boris Schlossberg (Boris Schlossberg), Managing Director of Currency Strategy at BK Asset Management.

Biden’s $ 1.9 Trillion Coronavirus Pandemic Relief Package That Was Unveiled Last Week Includes Direct Payments to Citizens and $ 350 Billion in State and Local Government Assistance. 

«The market will trust that it will try to do everything in its power, both financially and regulatoryly, to make life easier for small-cap companies as we move forward..», – said Schlossberg.

Biden’s proposed $ 20 billion national vaccination program should also accelerate economic recovery. Schlossberg said small companies surviving the pandemic will be stronger.

«You have tremendous operating leverage on a small-cap company because those that survived now have a chance to really bounce back with a much smaller workforce and therefore much better profit margins.», – he said. «A better bet is a long Russell and a short Nasdaq in the future. This is a rate that hasn’t worked at all in the last four years, but I think it will work very well in 2021».

Small-cap stocks to look better in 2021

However, according to the founder of TradingAnalysis.com Todd Gordon (Todd Gordon), small-cap companies have a long way to go before they catch up with large-cap tech companies. Russell 2000 Drops To Lowest Level Since Nasdaq Peak technological bubble, which could mean the last rally is «dead cat jump», he said in the same interview.

Whether it’s a temporary surge or something else, Gordon is willing to bet on a fraction of the small-cap segment..

While the IWM Russell 2000 ETF rallied on Tuesday, the rally was driven by a rally in stocks. The Dow Jones small-cap growth index climbed 1.6% on Tuesday, up from + 0.6% in the Dow Jones small-cap value index. According to Gordon, outperforming growth stocks small companies versus small-cap value stocks return to March 2020 low.

«This is not so much rotation as growth. This is high-cap growth into small-cap growth. So the growth in trade is still going on. We’re just sliding down a little down the market cap scale, Gordon said..

Small-cap stocks to look better in 2021

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