In Their Own Words: 10,000 Small Businesses on Challenges to Growth
The desk asserts that small businesses, which form the backbone of the U.S. economy, are facing significant headwinds impacting their growth trajectories. Per the full note from Goldman Sachs, these enterprises employ nearly half of the national workforce but continue to struggle due to factors like rising costs and access to capital. This highlights a disconnect in economic recovery that may impact consumer sentiment and, by extension, foreign exchange markets. Analyzing these insights is crucial as they may affect currency stability and cross-border investment flows.
What the desk is arguing
The desk emphasizes that small businesses in the U.S. represent over 99 percent of all enterprises and employ around 60 million Americans. This essential economic segment is facing multiple challenges that could hinder broader economic growth. Per the full note from Goldman Sachs, these issues include rising operational costs and difficulties accessing financing, which are critical for expansion efforts.
The significance of this data resonates especially with upcoming economic indicators. Small business health is often viewed as a leading indicator of overall economic vitality, and any persistent growth challenges may weigh on market confidence as part of a larger narrative surrounding economic sustainability.
Where it sits in our coverage
We maintain a consensus target of 1.075 for the USD against multiple pairs, with J.P. Morgan's forecast aligned at 1.10 and Bank of America diverging with a lower target of 1.04. The small business outlook aligns with our broader view that highlights potential volatility based on economic fundamentals, particularly in currency markets.
How other firms see it
Consensus among aligned firms like jpmorgan suggests a continued bullish outlook for the USD, factoring in the potential resilience of small businesses. In contrast, bofa presents a more cautious stance reflecting the concerns around liquidity and financing challenges.
The trajectory of USD pairs might closely correlate with U.S. consumer spending indicators and the Federal Reserve’s monetary policy adjustments, impacting flows and rates across various currency pairs.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Small businesses are critical to U.S. employment and economic stability, representing 99% of enterprises.
- 02Challenges in accessing capital and rising costs significantly hinder their growth prospects.
- 03The state of small businesses can influence broader economic sentiment and FX market stability.
- 04Upcoming economic indicators will be essential in assessing the impact on the USD's trajectory.
Market implications
Traders should monitor the forthcoming U.S. consumer spending data as it is indicative of small business performance and overall economic health. Key levels around 1.075 in USD pairs should be watched closely for stability or resistance.
Risks to this view
Deterioration in small business sentiment could force a bearish adjustment, particularly if rising costs lead to significant layoffs or credit market tightening. An unexpected dovish shift from the Federal Reserve may also reverse the current bullish sentiment.
Small businesses make up over 99 percent of all U.S. enterprises, and they employ 60 million Americans, nearly half the national workforce. In this episode, we sit down with Steve Strongin and Amanda Hindlian of Goldman Sachs' Global Investment Research Division to discuss the state of small businesses in America. We also hear directly from some of the small business owners of Goldman Sachs' 10,000 Small Businesses program about their biggest challenges to growth.
This podcast was recorded on March 9, 2018. All price references and market forecasts correspond to the date of this recording. This podcast should not be copied, distributed, published or reproduced, in whole or in part.
The information contained in this podcast does not constitute research or a recommendation from any Goldman Sachs entity to the listener. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, as to the accuracy or completeness of the statements or any information contained in this podcast and any liability therefor (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed. The views expressed in this podcast are not necessarily those of Goldman Sachs, and Goldman Sachs is not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast.
In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Goldman Sachs to that listener, nor to constitute such person a client of any Goldman Sachs entity. Copyright 2018 Goldman Sachs & Co. LLC.
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