💥 Small business optimism surges most since… 2016 election 💥
The Sandbox Daily (12.11.2024)
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Today’s Daily discusses:
small business optimism surges
Let’s dig in.
Blake
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Quote of the day
“Be the reason someone believes in the goodness of people.”
-Karen Salmansohn
Small business optimism surges most since… 2016 election
The NFIB Small Business Optimism Index soared a record 8.0 points in November to 101.7, the highest level since June 2021 after 34 months remaining below the 50-year average of 98.
The surge is similar to the Trump bump in November/December 2016 (total jump of 10.9 points across both months), as small businesses expect to benefit from tax cuts and other pro-growth Trump policies.
The exuberance supports a positive outlook for economic growth in 2025.
Nine of the ten NFIB components rose. The biggest improvements by far were in the outlook for the economy and expectations for real sales growth in the near-term, both of which soared after being depressed for most of this business cycle.
Not surprisingly, more firms indicated now was a good time to expand their business. CapEx plans jumped to their best level since early 2022, supported by expectations for more favorable credit conditions. Additionally, more firms reported open positions, while hiring plans for the next three months hit their best level this year, consistent with some downward pressure on the unemployment rate in the near-term.
Inflation continues to top the list of small businesses’ most important problems, largely because of rising wage and other cost pressures.
Investopedia agrees, naming it atop its 2024 Terms of the Year.
Some remain cautious about this exuberance, though.
In a note to clients, Neil Dutta of RenMac wrote:
“There might be some room for the optimism to fall short of expectations. Put differently, the uncertainty heading into next year is still quite high.”
One final point reflecting over the chaotic chapter in the economy and markets these past few years.
For months on end, everyone and their mother was bracing for a recession. Despite sentiment and the like (soft data) plunging over the previous four-year period, the actual economic and business activity (hard data) during the Biden period held up just fine.
Here’s Joe Weisenthal on the historic divergence shown in the chart below:
“If you wanted to make an argument that notions of a “vibecession” — or a disconnect between reality and sentiment actually exists — then at least in this one corner of the economy, this is the money chart.”
Trump wins the election last month and the gap immediately closed, as small businesses across America rejoice all things taxes, deregulation, and the economically-sensitive President-elect.
In other words, sentiment around the economy overshot the actual reported economy by an extreme measure – just like investor behavior around market tops and bottoms.
Sometimes things aren’t as bad as they appear.
Sources: National Federation of Independent Business, Bloomberg, Renaissance Macro Research, Investopedia
That’s all for today.
Blake
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