Small Businesses’ Big Message For The Markets
Jesse Felder | Dec 16, 2021 12:11AM ET
Earlier this week, the Julian Brigden ) plots median CPI alongside small business price plans (set forward 10 months). Clearly, if anyone has their finger on the pulse of underlying inflation trends, it’s these guys and they are sending a very loud message that it is anything but transitory at this point.
Second, small businesses are all also very good leading indicators of corporate profits margins in the broadest sense. The chart below (hat tip to the brilliant minds at Nordea ) plots the 12-month change in S&P 500 profit margins alongside small business optimism less compensation plans (set forward 1-year).
Clearly, what small businesses see in terms of inflation trends going forward has them very concerned about their bottom lines over the next year. This sends a very loud message regarding the trend in corporate profits in a much wider sense.
Considering the fact that, even though Jay Powell has capitulated and deemed inflation trends more than transitory at this point, the majority of investors are still earnings recession amid the most extreme valuations in history. Happy New Year?
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