How does the stock market affect small business confidence?

35% of U.S. small business owners say the stock market's performance affects their business confidence.

35% of U.S. small business owners say the stock market's performance affects their business confidence.

The stock market is booming, adding $4 trillion in value, by some estimates, since Donald Trump took office in January of this year. The white-hot market has some predicting even bigger things over the next decade, and others suggesting it has nowhere to go but down. What does it all mean for local commerce?

Typically, we associate the stock market with larger companies, but Wall Street has an impact on Main Street, as well. In fact, 35% of small business owners nationwide say the performance of the stock market affects their business confidence, according to a national study by Womply. In this post, we’re building a profile of small business owners who get confidence from the stock market.

Overall, they’re just as optimistic (65% optimism) as those who don’t care about the markets (61%), but their views on business do vary in other important ways. For example, stock-watchers are 23% more likely to expect their business to make them wealthy. To understand how this perspective varies regionally, we've also ranked all 50 states by small business stock sensitivity (the rankings will surprise you).

First, let’s level-set:

  • “Stock-watchers” = small business owners who say the stock market’s performance affects their business confidence.
  • “Non-stocks” = Those who say it doesn’t affect their confidence.
  • If not stated explicitly, all comparisons are between stock-watchers vs. non-stocks.

Reasons for optimism

In our national survey, we asked optimistic small business owners to rank their reasons for optimism. It’s not surprising that stock-watchers favored a businessman for president. In fact, they were 54% more likely than non-stocks to say Trump’s election was their top reason for optimism about business this year. Trump’s election was the #1 reason for optimism for stock-watchers and the #3 reason for non-stocks.  

Reasons for pessimism

Here again, Trump looms large. If you isolate pessimistic small business owners, Trump’s election is the #1 reason for anxiety for stock-watchers and non-stocks alike, although non-stocks were 37% more likely to say the Trump presidency was their top reason for business concern this year.

Taking action

Nationally, we found a strong correlation between merchant optimism and actions that add economic value, like hiring, giving raises, and business expansion. This pattern carries over to stock-watchers, who are: 

  • 35% less likely to close a business location
  • 23% more likely to increase inventories
  • 16% more likely to give raises

Causes for concern

We asked respondents to rank their top worries. We found that stock-watchers are more likely to get anxious about things they can’t really control, including the economy and national policies that affect business. Specifically, they are:

  • 32% more likely to say Obamacare repeal would have a positive impact on their business
  • 25% more likely to worry about tax concerns
  • 17% more likely to worry about the possibility of an economic recession
  • 16% more likely to worry about health insurance 

State of confidence

Quick, guess which states’ small business owners are most responsive to the stock market. If you chose New York, the home of Wall Street, you’re *kind of* right — the Empire State ranks #5 nationally, with 45% of its merchants reporting that they look to stocks as a source of business confidence.

Surprisingly, the top three states are all in the deep south: Alabama, Mississippi, and Arkansas rank #1, #2, and #3, respectively. Unsurprisingly, some of the country’s most rural states — Wyoming, Alaska, and North Dakota — are among the most agnostic toward the stock market. Check out the full list below.

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