QI TAKEAWAY — Main Street is wising up to recession. More pain in the Russell 2000 would flag as much. Small cap stocks should continue cheapening. An entry point for a value trade is not imminent. Stay sidelined.
- In the NFIB’s April survey, 4% of owners cited Poor Sales as their biggest challenge, just off March’s post-pandemic low of 3%; Poor Sales lows portend lows in unemployment, and the recent topping of M&A activity validates risks of dampened revenue outlooks
- Small business inventory plans fell to a net 1% in April, the lowest reading since the pandemic began; ISM’s Mfg New Orders series has also tracked with the easing in Main Street future inventories, with the Russell 2000 down 27.9% since a November 8, 2021 high
- Post-pandemic, the Russell lagged two months has a 0.94 correlation with small business job openings; similarly, the Russell lagged one month has a 0.74 correlation with hiring plans, implying that the current correction is on a crash course with Main Street labor demand