Two Reasons Why Small Businesses Are Booming

The Seacoast Shipyard Association wants to hire 800 workers this year at its Kittery, Maine factory.

Sandeep Thakrar plans to spend $1.2 million to renovate 10 small hotels he owns in Pennsylvania, Maryland, and West Virginia.

WIN-911, an Austin, Texas-based software company, plans to add five or six workers to its 35-person workforce (a 15% increase).

Good times are rolling for U.S. small businesses.

The reason is simple: They’re optimistic about the future.

There’s a reason we call small businesses the “backbone of the economy.” They make up 99.7% of U.S. firms. They also employ 49% of Americans and create 64% of new jobs.

When small businesses are strong, it’s a sign that the overall U.S. economy is humming along.

That won’t surprise regular readers. I’ve been telling you this since last year… when I went on my Rust Belt Tour.

Recommended Link

Limited Time: Get $2,500 Worth of Trading Recommendations… FREE

This hugely popular $5,000 trading service will help you navigate today’s volatile market – and make 1,093% MORE MONEY than your typical trades in calm markets, whether stocks go up or down.

Until midnight tonight, you can get $2,500 worth of this research for free.

Even better – we’ll walk you step-by-step through a method proven over 153 trades to pay out 11 TIMES more money, to demonstrate exactly how much you can make over the next 6 to 9 months. Offer ends midnight tonight, so don’t risk missing out.

Click here for the details

At the Daily, we like to put our boots on the ground. (I’ll be doing a lot more boots-on-the-ground research soon. Stay tuned…)

Most financial reporters stay in their Manhattan office cubicles… They see something different than we do from outside the Big Apple.

The cities I visited had healthy economies. I saw expanding businesses, “help wanted” signs, and happy people.

As I’ll show you below, when small businesses are optimistic, it’s a great time to be an investor.

Two Tailwinds for Small Businesses

Businesses are optimistic for two reasons: fewer regulations and lower taxes.

Let’s deal with regulations first.

Small business owners know that President Trump isn’t going to pass unnecessary regulations that hamper growth. (We told you early in February 2017 that fewer regulations would help companies. See “How to Profit from Trump’s Sleight of Hand.”)

With fewer regulations, businesses can predict the future more confidently—meaning they can undertake expansion initiatives without worrying about regulatory risk.

And with President Trump’s tax cuts, businesses keep more profits—14% more, to be exact.

Fewer regulations and tax cuts have spurred capital spending. It’s up 39% from last year. As you can see in the chart below, that’s the biggest growth since 2011. 

When small businesses are optimistic, the market follows…

Small Businesses Are Booming

The businesses I mentioned above aren’t alone. Small businesses across the country are more optimistic about the future than they’ve been in over a decade.

Just look at this chart from the National Federation of Independent Business (NFIB)…

As you can see, the other two times small businesses were this optimistic were in 1983 and 2004.

Both times, the stock market soared in the following years.

S&P 500 Returns

Year 6-Month 1-Year 2-Year
1983 -5.5% 15.2% 41.6%
2004 3.4% 10.9% 16.3%

Sure, there was a little volatility at the start of 1984… The important thing to understand is that the market was considerably higher over the next couple years.

When small businesses profit, so do large businesses. And that’s happening again.

According to research firm FactSet, first-quarter earnings are up 24% from last year. So far, a record 78% of companies beat their earnings estimates this quarter.

Companies large and small are thriving, which should lead to higher stock prices. I’m using this dip in the market as a buying opportunity. I hope you do, too.

Regards,

Nick Rokke, CFA
Analyst, The Palm Beach Daily

P.S. Are you a small business owner? Have lower taxes and fewer regulations boosted your bottom line? If so, tell us how your business is doing right here

CHART WATCH

Help Wanted In the Job Market

With companies hiring so quickly, there may not be enough willing workers to meet demand.

According to the U.S. Bureau of Labor Statistics (BLS), there’s one job opening for every person currently unemployed.

That’s great news for workers. It means there are plenty of jobs out there… If you’re not happy in your current position, now’s a great time to look for something new.

And with businesses competing for labor talent, we should see paychecks growing, too.

Nick Rokke

IN CASE YOU MISSED IT…

Master trader Jeff Clark’s method typically pays out 3 to 5 times more money than you’d normally see in a stock…

But for one short period every year, Jeff’s typical gains pay 1,093% MORE MONEY on average… and you can collect these payouts whether the market goes up or down.

We’ve entered this period now. And Jeff believes it could be the biggest money-making opportunity since 2008

Posted in Palm Beach Daily
Join our Daily Newsletter

Reading The Palm Beach Daily will help you grow your bottom line and live a happier life in just three minutes a day.