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

The Charging Bull bronze sculpture, also known as Wall Street Bull or Bowling Green Bull in New York City with tourists around taking photos of it as it is a landmark, a tourist destination, a popular attraction and symbol for Wall Street and Financial District as well with aggressive financial optimism and prosperity, wealth and luck, located on Broadway at the Financial District of Manhattan. It was created by Arturo Di Modica in 1989.

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{6b17707e448e34f54d6d1a9e433426abf2addbba8938cba1c35a09fc0ada7803} with January only half over, part of a 12-month trend that has seen the gauge soar 31{6b17707e448e34f54d6d1a9e433426abf2addbba8938cba1c35a09fc0ada7803}.

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

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