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Last week, the Federal Reserve cut interest rates for the first time in more than four years, signaling a potential rebound for stocks and Wall Street. But what does this mean for the backbone of America, our small businesses?
A new study from CNBC|SurveyMonkey, conducted just before the Fed announced its first interest rate cut, which was expected – although the exact extent of the cut was not known – offers a glimpse into the minds of these entrepreneurs. The quarterly snapshot of Main Street companies shows a mix of cautious optimism and lingering concerns about inflation and rising costs. In view of the upcoming controversial presidential election, the uncertainty is palpable.
Four in ten respondents (38%) agreed that inflation remains the biggest risk to their business. This is almost three times higher than the next highest risks, consumer demand (13%) and interest rates (10%).
However, the expected interest rate cuts also triggered a boost in confidence. A third (33%) of respondents believed inflation had peaked, and overall optimism about inflation relief is the highest since the first quarter of this year.
Three in five (62%) small business owners expected the recent interest rate cuts to have some impact on their business, with 22% expecting a major impact and 41% expecting a minor impact. These cuts are fueling initiative from small business owners: 40% wanted to increase their investments, 37% planned to expand their business and 26% said they would increase their inventory. Only one in five planned to increase their employees' wages or benefits (20%) or hire additional employees (17%).
Prompted by the Fed's recent decision, there is obviously hope for stability as the economy appears poised to take a big step in a positive direction. For borrowers looking to take advantage of cheaper borrowing costs, this move could provide the boost they've been waiting for.
Ahead of November, business leaders on both sides of the political spectrum are voting largely along party lines, with Democrats and Republicans sticking to their partisan choices.
However, the survey revealed an interesting divide. Republican small business owners preferred Joe Biden over Kamala Harris. Half of Republican small business owners (53%) supported Biden over Harris as the Democratic nominee, perhaps indicating that the different candidates' economic policies are being received differently on Main Street – or perhaps there is an expectation that Biden will be easier to defeat in the election .
Meanwhile, Democratic business leaders are overwhelmingly behind Harris. Nine out of ten (90%) of these owners support Harris as the Democratic candidate, demonstrating the strong political polarization that exists in this community.
Our study found a notable lack of enthusiasm for vice presidential candidates Tim Walz and JD Vance on both sides of the political spectrum.
Nearly four in ten (37%) small business owners believed Vance would have a positive impact on their business, 13 points lower than Donald Trump (50%) but still more than Democratic Vice President-elect Walz (29%). Although both candidates received majority support among small business owners in their respective parties (68% for Vance among Republican small business owners and 67% for Walz among Democratic small business owners), the presidential candidates received stronger support in their respective parties (89% for). Trump and 79% for Harris).
The CNBC|SurveyMonkey study confirms that companies are cautiously optimistic as they continue to navigate the headwinds of this uncertain landscape. As interest rate cuts encourage optimism and owners plan to reinvest their businesses in various ways, it will be essential to continue monitoring and analyzing this group as election season heats up.
– By Eric Johnson, CEO, SurveyMonkey
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