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OPINION

Reasons Things Are Looking Up

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

Americans certainly have many reasons to be optimistic about 2017, starting with the markets and the economy. After all, according to a recent Wells Fargo/Gallup Small Business Index, post-election investor optimism hit a nine-year high during the month of November. This cannot be solely credited to the election, but it is the third-straight quarter of improving sentiment; nine months of this kind of trajectory certainly represents a positive trend.

You often hear me talk about the National Business Survey, which is a survey of thousands of small businesses across the country. The National Federation of Independent Businesses conducts this online sampling each month. Last month, I mentioned that, for the first time in ages, confidence in the economy had crossed into positive territory.

We had not seen this kind of news coming from the NFIB since 2007. Indeed, this is the best news on the economy in a very long time. These are small business owners and entrepreneurs who have their ear to Main Street as good—if not better—than anyone else.

A Confident Outlook

It only stands to reason, with economic indicators on the upswing, that consumer confidence would be high as well. As a matter of fact, it is currently at the highest level since August of 2001. To me, consumer confidence is one of the most important factors to consider as an indication of where things might be going.

The Wells Fargo/Gallup poll also showed the highest rate of business optimism in eight years. Not only is this encouraging, this was no mere blip on the radar screen. The reading jumped from 68 to 80 over three months; compared to a year prior, the index increased by 48 percent.

It also indicated that 58 percent of small business owners believe that revenue will increase during the next 12 months. Thirty-five percent plan to increase their spending and 36 percent expect to hire new workers.

Maybe we can’t give Donald Trump all the credit for this optimism. Still, the idea that we will soon welcome a pro-growth president who is looking to cut taxes helps—so does a president that most people believe truly cares about America and the American people.

A Dark Cloud?

The bad news in this optimistic scene is that stocks are still incredibly overvalued. The same holds true now as before the election: it seems likely, according to past history, that we are in for a correction in stock prices. After all, they are far more overvalued today than they were in the months leading up to the election.

In my opinion, one of two things will happen. One is that we will see a correction in the first half of the year. The second is that traders, institutional investors and even the average Joe believe that growth of the economy will pick up—so much so, that this growth will catch up with current valuations, thereby ending any thoughts of a correction.

The real difference between a correction—or even a recession—compared with the likely stagnation of an Obama or Clinton administration, gives us great cause for optimism. The combination of a sane fiscal policy coming out of Washington, D.C., and a rational, pro-growth tax code gives us reason to believe that any downturn in the markets will be temporary. There’s a lot of light at the end of that tunnel.

It means that we actually have leadership likely to get things moving in the right direction—and very quickly.

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