'Willing to Accept More Risk': Investors Flock to Small-Cap Stocks

Thursday, 06 Mar 2014 07:49 AM

By Dan Weil

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Investors are snapping up more small-cap stocks than large-cap stocks, as the desire to take on risk remains high.

The Russell 2000 index of small-cap stocks climbed to a record of 1,212.82 Tuesday and stood at 1,203.86 late Tuesday. It has gained 3.5 percent so far this year, compared to a 1.4-percent increase for the Standard & Poor's 500 Index.

"Investors are coming down cap to find growth, and are willing to accept more risk to pay up for some of that growth," Craig Johnson, technical market strategist at Piper Jaffray, told CNBC.

Editor’s Note:
5 Shocking Reasons the Dow Will Hit 60,000

On a "technical measured objective, the Russell 2000 could trade as high as 1,450."

Small-cap companies are generally domestically-focused, so when small-cap stocks lead the market higher, that tends to be viewed positively for the market as a whole, according to CNBC.

"Participation in the market is growing as some investors play catch up after missing last year's rally," Johnson said. "We have a long-standing bullish position, and expect the S&P 500 to reach 2,100 this year." The index stood at 1,873.94 late Wednesday.

To be sure, there are other ways to look at the stock market now. Robert Doll, chief equity strategist at Nuveen Asset Management, says that expanding price-earnings ratios helped stocks soar last year, but in 2014 the market is more dependent on earnings.

"This year the earnings are going to have to come through to have that proverbial good year for stocks," he told Morningstar.com.

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

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