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Morning Commentary

Helping Small Become Big

By Charles Payne, CEO & Principal Analyst
12/6/2017 9:45 AM
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Tuesday was a lackadaisical session from the opening bell even as some buyers sniffed out opportunities in oversold tech names. Nonetheless, the recent negative wave in tech is beginning to take a toll. 

Market Breadth:

NYSE

NASDAQ

The most intriguing index these days is the Russell 2000 Index. It serves as a proxy for the domestic economy, and it has been a gauge on the prospects of Republicans passing a tax bill that empowers small business and the middle class. The index suffered the largest loss among the other large indices and continues to trail them by a wide margin year to date.

2017 Index Performance

Change

NASDAQ

+25.6%

Dow Jones Industrial Average

+22.4%

S&P 500

+17.5%

Russell 2000

+11.7%

 

Yesterday, President Trump met with “four great families,” along with small business owners and their families at the White House. He told them at a “certain point you’re going to be making so much money you are not going to know what to do with it.”

President Trump went on to talk about “enthusiasm levels for business and for the economy” being at the highest levels. The President also told the media that those small families want to see tax cuts as well. That’s true and there are other ways Washington, D.C. can help.

The good news is that the administration is stepping up to the plate. For Fiscal Year 2017, the main loan program SBA 7a issued more than 62,000 loans.  A record 9.58 billion was given to minority businesses; $45.4 million was in the form of micro-loans from $35.2 million in the Fiscal Year 2016 (note: loans of $50,000 or less)

Most observers are giving credit to SBA Administrator Linda McMahon for streamlining and improving processes.

Freeing up Banks to Lend

The other good news is that there are additional moves being made on Capitol Hill that could help small businesses.

The Senate Banking Committee is close to giving small banks relief from onerous rules associated with the Volcker Rule and the Consumer Financial Protection Bureau (CFPB).

Committee Chairman Senator Crapo of Idaho submitted legislation, S. 2155, the "Economic Growth, Regulatory Relief and Consumer Protection Act,” with the backing of ten Republicans and Democrats that will lessen the compliance burden for banks with deposits of $250 billion or less. 

It’s backed by The National Association of Federal Credit Unions; The National Association of Home Builders; The U.S. Chamber of Commerce, and The Mortgage Bankers Association.

This move will allow loans to flow into small businesses and Main Street.

Leveling the Investing Playing Field Rules

Although a similar effort failed earlier this year, I think this will make it across the finish line this week.

Also late in the session, 40 Republican members of the House sent a letter to leadership asking for the removal of the so-called ‘first-in/first-out’ so they are not forced to sell their oldest positions to save on taxes. This accommodation has already been extended to the mutual fund industry and would be a shame if foisted on individual investors.

Today’s Session

A smattering of corporate earnings is not impacting the market, which has become defensive and vulnerable.  This morning’s employment report from ADP came in at 195,000, which beat consensus was powered by encouraging trends in higher paying occupations.

The theme of small business played well in November as companies with less than 50 workers hired more people than companies with more than 500 employees.  YTD, Small business hired 639,000 while Large hired 698,000.

Let’s watch the market shakeout this morning and not force the issue.

 

 


 

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