The market has definitely benefited this year from a lack of headlines out of Washington regarding policy or legislative actions. Over the last couple of years, it seems as though every time policy or legislative-related issues make headlines, it is pretty much a guarantee that it will have a negative impact on stock prices.
But just because Washington has been out of the headlines and having little impact on the market, don't think that it is no longer acting as a weight on small businesses. A case in point is today's NFIB report on small business optimism. Although the overall headline reading was stronger than expected (94.4 vs. 92.1), businesses still feel as if policies coming out of Washington are the biggest threat to the success of their operations.
In each month's survey, small business owners are asked what is the No. 1 problem they are facing from a business perspective. In the table above we highlight the results of this month's survey, and the results are an embarrassment. Normally when you start a business, the main issue is whether or not you will have enough revenues to support your business and yourself. In this month's survey, however, only 16% of the small business owners that were surveyed cited poor sales as their No. 1 problem, which ranks third on the list.
The two problems cited by small business owners more than any others were taxes (24%) and government requirements and red tape (23%). On a combined basis, 47% of all small business owners believe that policies out of the government are the biggest problem they face, and those two problems outnumber poor sales by a margin of nearly three to one.
In the chart below, we show how the combined problems of taxes and government requirements and red tape (Washington) have historically compared to poor sales as the No. 1 problem facing small businesses. As shown in the chart, Washington has steadily become a larger and larger problem over the last five years. While poor sales saw a spike leading up to and during the recession, it has been steadily declining since 2010. So far this year, this has not been an issue facing the markets, but that doesn't mean it will not become an issue once again in the future.