This morning, the U.S. small business optimism index was released and the index increased in May to 96.6 compared to 95.2 in April. This was a 1.5% increase MoM. Most importantly, as you can see is that sales growth is no longer the major obstacle for small businesses but hiring the right people, i.e. labor quality. We view this positively for a growing US economy and thus expanding GDP as we cycle through the bad weather during the first quarter and continued uncertainty around the affects of easing quantitative measures by the Federal Reserve.
Add in this morning HD Supply discussing improving sales trends in May coupled with strong comps from Fastenal and Grainger and we believe GDP linked names should be well positioned in this market. “We remain cautiously optimistic that our end markets will continue to build on the emerging strength that we are seeing in select geographies.”
Names we continue to like are AGCO, AIG, BHI, BA, CAT, CMCSA, COST, CMI, DE, DOW, DD, GE, GSK, HON, INTC, JNJ, JNPR, MSFT, MON, ORCL, PCAR, PH, UPS, WHR
