With the stock market soaring one would expect businesses to be exploding with optimism. Since the beginning of 2013 the S&P 500 is up 6.4%, that’s explosive growth for such a short period.
But rather than confirming the optimism being implied by investors, business owners and management are sounding the alarms. Today’s NFIB Small Business Economic Trends report barely increased, coming in at 88.9, up only slightly from 88 in December.
The headline was not a resounding sign of strength, but once you drill into the data, small business optimism looks even worse. Only 6% of businesses surveyed thought the next three months would be a good time to expand. Additionally 26% more small businesses reported lower earnings in the last three months than the prior three months. That echoes the warnings we have been flashing about margins.
Concerns about economic growth aren’t unique to small business owners. Caterpillar’s management showed little optimism in its 2013 outlook for the world economy. CAT CEO Doug Oberhelman said “The range of our 2013 outlook reflects the level of uncertainty we see in the world today. We’re encouraged by recent improvements in economic indicators, but remain cautious. While we expect some improvement in the U.S. economy, growth is expected to be relatively weak. We believe China’s economy will continue to improve, but not to the growth rates of 2010 and 2011. We also remain concerned about Europe and expect economies in that region will continue to struggle in 2013.”
In the overly optimistic language of publicly traded companies’ CEOs, any sign of doubt in economic growth should be a warning signal to the markets. Oberhelman uses words like uncertainty, cautious, weak, concerned and struggle. Those are not words of optimism.
With businesses increasingly wary of future economic growth, investors should be taking a hard look at their portfolios.