As a small business owner and economics nerd, I always like to check in with the NFIB Small Business Optimism Index reported each month by the National Federation of Independent Business. It’s a monthly survey that asks almost two-thousand of its members what they expect as far as business conditions in the next few quarters; stuff like hiring and expansion plans, expectations for sales and credit availability, etc.
No surprise, the index is down sharply since March. Fact is, after hitting multi-decade highs at the beginning of this year and eclipsing numbers we last saw in the early eighties, the index is down to 90.9, levels we started to work our way out of back in 2010 and 2011.
What really caught my eye was two things: expectations for sales over the next six months dropped 30 points to a low never seen in the 46-year history of the index. Few businesses expect a boom in the short term. The other eye opener is the uncertainty index. It fell to a multi-year low at 75. In other words, certainty went up. Small business owners were quite certain that the next few months will be really bad.
But when the questions start to go beyond six months, you begin to see optimism return somewhat. Because this recession was caused by government policy in response to the Coronavirus, and not an out-of-control business environment like in 2008, business owners seem to agree this will be a short-lived downturn.
I think to be a small business owner, you have to be somewhat of an optimist by nature. And as investors, it has always paid to think positively about the future. We believe there may be some more bad economic data to get through before we start to see things turn around, but we also know that things will turn up and, for those who are prepared to find the opportunities, the glass is half full. For now, if you can, we think it’s a good idea to support the small businesses in your community.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. The companies presented here are for illustrative purposes only and are not to be viewed as an investment recommendation.