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The NFIB’s small business optimism index rose dramatically in November, driving post-election euphoria over Donald Trump’s incoming presidency to the biggest monthly gain since 1980.
This came as no surprise. The Barometer is notoriously tied to politics, thanks to the strong connection between Republican leadership, a loose regulatory environment and lower taxes, which boost small business morale.
Whether this is true is of course open to debate. The NFIB press release says small businesses expect a “repeat performance” from Trump’s sub-2% first-term inflation — while few economists expect these numbers amid plans for tariffs, tax cuts and other inflationary policies.
But whether justified or not, a rise in optimism that is so high for this oft-ignored index deserves a second look this time around – and our selection as Chart of the Week. Because sentiment can have real dollar effects on the markets.
If the jump – which puts the index at June 2021 levels and above the 50-year average for the first time in a few years – is big enough to change the way small businesses hire and spend, the knock-on effects will impact on the markets. .
In its 2025 stock outlook, David Kostin, Goldman Sachs’ chief U.S. equity strategist, wrote that his team expects the improved outlook for small businesses “will boost earnings and equity valuations, with revenues tied to those expenses.”
He listed 60 stocks that get most or even all of their revenue from small businesses. You can guess a lot. An example: United Rentals (URI), Groupon (GRPN), Intuit (INTU), Cintas (CTAS), Deere (DE), Waste Management (WM) and Shopify (SHOP).
Some of them are even Big Tech’s biggest: just think of all the companies advertising on Facebook and Instagram. Their parent company Meta (META) gets 75% of its revenue from small businesses. While artificial intelligence has skewed the stock’s valuation, it’s the little guy who keeps Meta’s light on. The money is real.
Kostin’s argument is supported by the latest sentiment readings – and by the post-election gains and broadening of the stock market. However, the details of the NFIB’s small business optimism release suggest that this is something to keep an eye on through very small business surveys and quarterly earnings reports for small publicly traded companies.
