The White House’s sweeping, and sometimes see-sawing, economic policy announcements on tariffs and other issues have a growing number of small business owners on edge.
Case in point: The National Federation of Independent Business’s (NFIB) Small Business Uncertainty Index shot up 14 points last month (see the chart)—the biggest one-month increase since the 1970s. Not only did uncertainty dramatically increase in January, but the overall level of uncertainty is currently the third highest on record.
A spike in uncertainty among these entrepreneurs demands close attention, given that small businesses employ nearly half of America’s workforce and represent more than 40% of America’s GDP*.
Small Business Uncertainty Spikes in January
You can hardly blame small business owners for feeling confused these days. Consider:
- President Trump seemed ready to "hit Mexico and Canada":https://www.horizoninvestments.com/what-could-tariffs-mean-for-investors-consumers/ with tariffs, two of the U.S.’s biggest trading partners and allies, then later opted to delay them.
- The latest inflation report showed prices in January rising more than expected, and the three-month trend rate of inflation is now the highest since late 2022.
- The flurry of activity in DC has left some questioning the state of government contracts with the private sector and the potential for a decline in government employment to dent demand.
The good news: Small business optimism, which rose after the November election, remains high—with the NFIB Small Business Optimism Index hovering above its 51-year average. Moreover, impending deregulation initiatives will likely act as a tailwind for small companies.
Still, businesses and investors don’t like uncertainty. The extent to which issues such as tariffs ultimately balance out with pro-growth developments will be a key driver of financial markets’ performance in the coming months. We believe a well-diversified portfolio that considers potential risk and potential reward may be especially helpful as the market navigates the current environment.
- https://www.uschamber.com/small-business/small-business-data-center
By Mike Dickson, Ph.D.
Originally published on Horizon Investments
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