The NFIB small business optimism index delivers a 8.0 point increase to 101.7 in November after 93.7 in October. The November index is well above the consensus of 94.5 in the Econoday survey of forecasters. The surge in optimism is accompanied by a drop of 12 points in the uncertainty index to 98 in November from the record high of 110 in October. While there is visible relief in the post-election period, the uncertainty index remains at its third highest level, matching 98 in October 2020 in the run up to the presidential election that year. The NFIB noted that this is the first time the index has exceeded the 50-year average of 98 after 34 months below the average. The November optimism index is the highest since 102.5 in June 2021.

Survey respondents appear to be anticipating loosened regulations and supervision under the incoming Trump administration. The lift in the optimism index is largely due to a massive 41-point rise in expectations for the economy to improve to 36 percent. This component hasn't been in positive territory since December 2020. The next largest increase is 18 points in expectations for higher sales to 14 percent. The reading for higher sales hasn't been positive since December 2021. It is probable that some of this giddiness will fade in the December report, but overall the index is likely to remain higher than in the last few years.

Survey respondents continue to report that inflation is their single most important problem followed by the quality of labor. These are at 20 percent and 19 percent, respectively. However, at least for inflation, reports that inflation is the most important problem facing small businesses are declining.

Business confidence has perked up on the view that a Trump presidency is good news for business and as the Federal Reserve appears to be engineering a soft landing. The consensus looks for NFIB business sentiment at 94.5 in November versus 93.7 in October.

The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of 10 seasonally adjusted components based on the following questions: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.

Small businesses are responsible for a majority of new job creation and the NFIB focuses on this sector of the economy. The direction of the health of small businesses can portend changes in the stock market - especially small caps.