Brett Eversole: Recession worries? Data indicates it's distant.
In recent years, a lot of the worry about the U.S. economy has come down to "bad vibes." If you look at the hard data, we've been doing just fine. But if you ask most folks, they feel like things have been terrible.
This so-called "vibecession" has shown up in sentiment data. The University of Michigan Consumer Sentiment Index crashed in 2022. And it has been low ever since.
The same was true for small-business sentiment... until recently.
That's according to the National Federation of Independent Business ("NFIB"). The NFIB is an industry group that surveys its members monthly to get their opinions on the economy. It then builds the responses into the NFIB Small Business Optimism Index.
Given the latest economic fears, we'd expect this index to be falling. But it's not... Instead, it's hitting a multiyear high. Take a look...
This sentiment index spiked in recent months. It went from a decade low in March to a two-year high in July.
Small-business optimism hasn't been this high since February 2022 – just before the Fed began aggressively hiking interest rates. And that's important...
Small businesses make up nearly half of the U.S. economy. And they account for around half the country's overall employment. So if small-business owners are scared, they might pull back on spending. Their fears can become a self-fulfilling prophecy... creating a recession.
Thankfully, that isn't happening today. Despite the recent spike in concerns, small-business owners are getting more optimistic about the future – not less.
That flies in the face of how most folks feel right now.
Economic fears reentered the spotlight this month. The latest jobs report showed that unemployment ticked higher in July. And last week, the Federal Reserve all but promised to begin cutting interest rates next month.
Lots of folks assume these are sure signs a recession is imminent... But that's far from guaranteed.
Instead, we should watch small-business sentiment in the months to come. If optimism keeps rising, it might mean these business owners see something that no one else sees... And we might avoid a recession altogether.
The opposite is also true. If small-business sentiment makes a quick reversal, it's a sign of trouble in the economy.
For now, this crucial group isn't scared. And that's a good sign for investors and the economy.
Good investing,
Brett Eversole from Stansberry Research
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For the Asians, might not exactly be less spending because for most Asians' situation it could be just a change in direction of spending (ie. on lower cost goods such as those from China) [smile]