No, We Are Not In A Bubble And Small-cap Stocks Don't Need To Participate, Says Inside Edge Capital's Todd Gordon

Todd Gordon, the founder of Inside Edge Capital, joined Benzinga’s PreMarket Prep Friday morning to discuss the recent rally in tech stocks and whether the market is forming a new bubble. Gordon said that, despite strength in tech stocks, including huge moves in chip names like Super Micro Computer Inc SMCI and NVIDIA Corp NVDA, it’s too early to call the stock market a bubble.
“I think we’re in a really good place right now,” Gordon said. “I like where the market’s at, there’s a lot of bearish sentiment out there. Still under-participated … I feel like there’s more money coming in.” 

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Gordon said that technological improvements, along with AI technology, will help improve productivity and efficiency, driving returns higher for investors. Despite the strong move in the overall market, many investors remain skeptical of the recent rally. A number of investors that are on the more bearish side point to weakness in small-cap stocks or the iShares Russell 2000 Index IWM, but Gordon questions that line of thinking. 

“Would somebody please tell me why a four-decade-high environment, in terms of interest rates, requires fundamentally unsound, leveraged companies who don’t have access to funding, why do they need to participate?” Gordon asked. “800 of the 2000 Russell stocks are not profitable companies and they have questionable balance sheets.” 

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Gordon believes that these small-cap companies do not need to perform well for the market to go higher. He does, however, believe that we could see some profit-taking at some point soon and potentially some consolidation. 

Gordon points out that the overall market is trading about 30% higher than the 200-day moving average. He said that, while this gives the appearance that the market is overbought, stocks were trading much higher at 40%-50%, higher than their 200-day moving average during previous bull cycles in 2020 and 2021. 

Watch the full interview below:

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