Wednesday, February 15, 2017

Small Business vs. the Markets

The National Federation of Independent Business said yesterday that its index of small business optimism reached its highest level in a dozen years last month, ticking up to 105.9. As recently as October, it was a below-average 94.9.

What's good news for small businesses may not be good news for the stock market, though. Figures from FactSet going back to the mid-1970s show that when the small business optimism index is 105 or higher, the S&P 500 has risen an average of just 4.7 percent over the following year.

The opposite is also true: When small businesses are feeling more pessimistic, the market does very well. When the NFIB small business index is at 85 or lower, the S&P 500 has gained 38 percent over the following 12 months.

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