Small Business Optimism Rises Amid Trade Jitters: 5 Top Picks
Zacks Investment Research | Dec 05, 2019 07:57AM ET
The investing circle is currently a little confused over conflicting news on the U.S.-China trade conflict. News and contradictory news are feeding into the market almost regularly generating volatile trading pattern. Large enterprises are also lacking on investment in the absence of any clear cut visibility of future businesses. However, a section of the U.S. business community — the small business segment — seems optimistic about the future despite trade-related hiccups.
The three latest surveys on U.S. small business revealed optimistic views on this segment. The U.S. Chamber of Commerce and MetLife (NYSE:MET)'s Small Business Index hit 71.3 in the fourth quarter of 2019 compared with 70.7 in the previous quarter, reflecting its highest level since the survey's inception in 2017.
Moreover, the CNBC/SurveyMonkey Small Business Confidence Index came in at 59 in fourth-quarter 2019 versus 57 in the third quarter. Additionally, the latest report of the National Federation of Independent Business (NFIB) showed that Small Business Optimism Index had an October reading of 102.4 compared with 101.8 in September.
Changes in the technology space, especially the implementation of advanced high-tech methodology opened up several new business opportunities for small business owners, prompting them to invest more in both technology and manpower recruitment.
Why Small Business Is Important
Small corporates create a significant number of jobs in the U.S. economy. More than 50% of the newly created jobs in the private sector originate from this space. These people constitute a large part of the customers of big businesses.
Moreover, small companies are a major part of the supply chain management systems of large companies for innovative and technologically superior inputs. Additionally, small businesses often end up being an important part of corporate America's customer base.
Additionally, owing to their predominantly domestic-focused business strategy, small business organizations are generally immune to the movement of the U.S. dollar. A strong U.S. dollar will make exports of large companies uncompetitive. However, small businesses primarily remain unaffected by foreign exchange volatility.
In a nutshell, small-cap stocks carry some special features that make them very useful in a volatile market. They are mostly immune to any external shock since the United States is the primary market of their products. This feature helps small-cap stocks to outperform the broader market defying extreme volatility.
Our Top Picks
Several small-cap stocks have popped in 2019. So, a selection from these stocks may be difficult. Here, our Zacks Investment Research
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