Small-cap stocks, which are sensitive to sentiment on the overall U.S. economy, have stalled out recently within range of their 2007 peak.
U.S. small-business confidence levels are also declining, according to a report this week. Small-cap exchange traded funds (ETFs) could slide if the outlook holds true, even as small-caps hover around four-year highs. [Small-Cap ETFs Fall Short of 2007 High.]
The National Federation of Independent Business’s (NBIB) optimism index fell to 91.9 in March from 94.5 in February due to a poorer outlook on sales, profits and the economy and increasing costs for oil and raw materials, reports Shobhana Chandra for Bloomberg. The optimism index hit a five-month low in March.
The gauge on expectations for better business conditions in six month’s time fell 14 points to a net minus 5% from 9% in February. Additionally, the gauge for whether it is a good time for small businesses to expand also diminished 2 points to a net 5%.
William Dunkelberg, the organization’s chief economist, believes that price increases due to the liquidation of inventory excesses is “over and profits are badly in need of some price support.”
The number of owners expecting higher sales decreased 8 points to 6% and the measure of earnings trends fell by 5 points to minus 32%. The number of respondents looking to hire over the next three months also diminished 3 points to a net 2%.
However, plans for capital investment increased by 2 points to a net 24%.
For more information on small companies, visit our small-cap category.
- iShares Russell 2000 Index Fund (NYSEArca: IWM)
- Vanguard Small-Cap ETF (NYSEArca: VB)
- iShares S&P SmallCap 600 (NYSEArca: IJR)
Max Chen contributed to this article.
For full disclosure, Tom Lydon’s clients own VB.