Stocks Rally, Russell 2000 Small-Cap Index Makes New All-Time Highs
Great day in the markets yesterday with all of the major indexes on the rise. The Russell 2000 Small-Cap Index led the way with a 1% gain as they broke out to the upside and made brand new all-time highs!
As I've mentioned before, it's always good to see the 'riskier' small-caps outperforming as it shows an appetite for risk and is a bullish sign for more gains to come.
Risk on!
As you know, I've been saying that small-caps would take the leadership position on the next leg up, and that is what's taking place right now. And this makes perfect sense as it's the small-cap stocks that were always expected to be the biggest beneficiaries of the corporate tax cuts. Why? Because many larger companies employed complex strategies to reduce their effective tax rate down to the mid-twenties even though the actual tax rate was 35%. But many smaller companies did not have the resources or the opportunities to do that and were stuck paying a much higher effective tax rate.
Now with the corporate tax rate at 21%, those companies will see a significant tax savings and they won't need to employ a team of lawyers and accountants to do it. That's a substantial savings. That means bigger EPS gains. And that money will likely be used to fund their growth. Add in the individual tax cuts and that means more people spending more money which means more sales. And again, with each dollar in sales being worth more, it's a virtuous circle of prosperity.
There are plenty of sectors going up right now as a rising tide raises all ships.
But I would keep a close eye on financials, tech, and business service stocks. One way to participate in all three is thru the revolutionary blockchain technology.
Most only know about the growing blockchain industry because of the secure way crypto-currencies account for their transactions. But now, more and more companies are using blockchain in their businesses as it provides an incorruptible digital ledger for all types of transactions and data transfers -- from financial, to shipping, to health records, and more. It's truly revolutionizing virtually all industries that rely on security, cost efficiency, and speed. And the companies using it are as impressive as the companies providing it. This includes titans of industries like IBM, Intel, and Nvidia, to plenty of innovative start-ups that fit squarely in the hot small-cap space!
This must-have technology has created an explosive industry and is poised for massive gains this year. To learn more about how the blockchain technology is shaping the way companies do business, and more importantly, how to profit from it, please check out our latest commentary...
5 Surprising Ways to Profit from Cryptocurrencies and Blockchain Technology
Best,
Kevin Matras
Executive Vice President, Zacks Investment Research
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