NEW YORK (TheStreet) --Harvest Volatility Advisors managing director Dennis Davitt explained why he feels the run in the small cap stocks has yet to find a ceiling on CNBC's "Power Lunch" Thursday afternoon. In the past week, the Russell 2000 is higher by 6.17%.
"They should outperform in the next year," Davitt said. "The quant funds that were in the Russell 2000 stocks, the small caps, they woke up after the election and said 17% of their revenues come from outside the U.S."
With 17% of revenues outside the U.S., the prospects of a Trump presidency in which policy could favor domestic enterprise, caused a re-allocation of funds back into the Russell, he noted.
"That's why we have seen this massive move in the Russell," Davitt added. "In the short-term there's a lot of people being tapped on the shoulder, forced to cover positions which have moved massively against them in a very short time."