According to the latest National Federation of Independent Businesses (NFIB) survey for November, small business optimism plunged.
From the NFIB (bold original)
Fall arrived literally this month, as small business optimism dropped from 93.9 to 91.6, largely due to a precipitous decline in hiring plans and expectations for future smal -business conditions. Of the ten Index components, seven turned negative, falling a total of 27 percentage points. The stalemate in early October over funding the government as well as the failed “launch” of the Obamacare website left 68% of owners feeling that the current period is a bad time to expand; 37% of those owners identified the political climate in Washington as the culprit—a record high level.
If small businesses have hardly been optimistic about the future which may be expressed in terms of withholding business spending and hiring, then what justifies a record Russell 2000?
Also what justifies fantastic valuations?
Russell 2000’s trailing PE ratio has been at 87.4 (!!!) while Forward PE ratio at 24.89. The implication is that markets have priced in earnings growth of small businesses at a whopping 351%!!!
The other explanation is that earnings have not been responsible for stock market prices….but the FED is.
Yet for every boom there is an equal and opposite bust.
1 comment:
With the Euro, FXE, now falling faster than the Yen, FXY, and the Steepner ETF, STPP, rising in value on a steepening 10 30 US Soveign Debt Yield Curve, and the Interest Rate on the US Ten Year Note, ^TNX, rising from 2.48, on October 23, 2013, investors are derisking out of World Stocks, VT, and World Small Cap Stocks, VSS, as is seen in the combine ongoing Yahoo Finance Chart of FXE, FXY, STPP, ^TNX, VT, and VSS, with the Emerging Markets, EEM, leading lower, and now Asia Excluding Japan, EPP, traded lower on a lower Australian Dollar, FXA.
I believe that the next sectors to quickly fall lower will not be the S&P 500 Companies, such as Micron, MU, but the credit dependent Small Cap Pure Growth Companies, RZG, such as HEES, and Small Cap Pure Value Companies, RZV, such as NICK.
Post a Comment