{"id":36,"date":"2021-01-27T10:59:28","date_gmt":"2021-01-27T18:59:28","guid":{"rendered":"https:\/\/smallcapdiscoveries.com\/?p=36"},"modified":"2022-01-11T12:44:22","modified_gmt":"2022-01-11T20:44:22","slug":"what-kind-of-microcap-market-is-this","status":"publish","type":"post","link":"https:\/\/smallcapdiscoveries.com\/articles\/what-kind-of-microcap-market-is-this\/","title":{"rendered":"What Kind of MicroCap Market Is This?"},"content":{"rendered":"

What Kind of MicroCap Market Is This?<\/h2>

\"\"Regardless of the global pandemic, and the related economic uncertainties, equity markets have been skyrocketing. Elon Musk has become the world\u2019s richest person as\u00a0Tesla <\/a>(NASAQ: TSLA) nears a $1 trillion dollar market cap, Robinhood traders are ruling the markets, SPACs have made a resurgence, real-estate markets are climbing, practically all commodities are trending higher, and Bitcoin is absolutely flying. With both large-caps and small-caps trending higher, global equity markets are hitting new highs, in a rip-your-face-off rally.<\/p>\n

It\u2019s clear equities are red-hot. And, over the past year smaller stocks \u2013 microcaps, have been one of the best returning segments of the equity markets as we predicted in early\u00a02020<\/a>, with the TSX-Venture up 50% in 2020 and the Canadian Securities Exchange (CSE) up a staggering 70%.<\/p>\n

Many investors have commented that the current market reminds them of the market of the late 1990s, before the dot-com bubble burst.<\/p>\n

It begs the question \u2013 are we in a bubble?<\/p>\n<\/div><\/div><\/div><\/div><\/div><\/div><\/div><\/section>

The Great Inflation<\/h3>\n

Quantitative easing (QE) is a form of monetary policy in which a central bank purchases longer-term securities from the open market to increase the money supply to encourage lending and investment.<\/p>\n

Amidst the global pandemic, central banks have scrambled to cover up demand shortfalls by propping up the economy, which has central banks purchasing bonds and treasuries with their goal of driving up bond prices.<\/p>\n

In return for buying bonds, it creates further demand for these bonds which pushes up their price but also lowers their yield. Interest rates are at all-time lows and in some countries the rates are now negative as borrowing costs decline \u2013 money has never been cheaper.<\/p>\n

With limited policies for central banks to stimulate financial markets, they have universally printed trillions of dollars, which are now sloshing through the financial markets. Greedy participants are prepared to buy any dip and are on the verge of going all-in on the next great stock \u201ctip\u201d \u2013 the mad money.<\/p>\n

Seemingly, market participants have cornered central bankers in a game of financial chess. With limited options, market participants are speculating on anything that can potentially provide returns as the \u201ccash is trash\u201d rhetoric grows stronger.<\/p>\n

The combination of low interest rates and limitless financial stimulus is fooling speculators to indulge in the grand delusion based on the fear of missing out. As the market rallies to unchartered territory, just about every asset class is trending higher \u2013 the great asset inflation.<\/p>\n<\/div><\/div><\/div><\/div><\/div><\/div><\/div><\/section>

What Can Investors Do?<\/h3>\n

We are not going to pretend to be macroeconomic experts, nor are we going to foolishly put out some type of \u201cthis is the top\u201d recommendation. The reality is no one truly knows. We are reminded of some sage advice from Peter Lynch, who said,<\/em><\/p>\n<\/div><\/div>