The Trump Effect

The Small Business Optimism Index of the National Federation of Independent Businesses had its fourth largest gain in almost half a century yesterday. This confirms our core thesis that Trump’s election will rouse the “animal spirits” at the grass roots of the economy responsible for 60% of US jobs. Two other previous large gains were also associated with the election of pro-growth presidents to replace anti-growth ones (Reagan in 1980 and Trump in 2016). In part it’s a matter of sentiment – Trump whatever his flaws, is a more effective economic cheerleader than Biden. But it’s also a matter of dollars and cents, with Trump likely to roll back the regulations put in place under Biden that asymmetrically impose costs on smaller businesses. Small-cap stocks have already outperformed since the election. With the NFIB Index far exceeding consensus expectations, there is likely more to come.