The election is over and a new government will take over in January. What does this mean for small businesses?  

The election is over and a new government will take over in January. What does this mean for small businesses?  

The election brings an amount of certainty, especially with the now-likely prospect of a unified government in which Republicans look to control the White House and both houses of Congress. This provides an opportunity for Republicans to pass some of their preferred initiatives with much less resistance in the time until the midterm elections. 

What does this mean for small businesses and small business owners? 

Generally speaking, certainty is good for businesses. The investment community seems to expect that this will enable a significant tax cut similar in scope to the TCJA 2017, a major tax code overhaul that cut taxes for individuals and businesses. This expectation sent stocks soaring in the aftermath of the election.

How should small business owners feel about the economy? 

The economy is currently in a strong position. The winners of this election have inherited a robust economy that has seen meaningful progress on inflation – an issue that consumers and businesses feel very strongly about – without sacrificing the job-creation engine and economic expansion.

What do the interest rate cuts mean for small businesses? 

Regarding interest rates, the Federal Reserve is an independent body and should not be influenced by the changing of governing parties. The Fed currently assesses the risks to the labor market and the risks to inflation roughly equally, and is mindful of the continuing softening of the labor market that we saw in the last jobs report. Recognizing this, the Fed cut interest rates for a second time in November, this time by 25 bps. 

That said, even if the Fed cuts rates again in December, it may be a while before small business owners feel the difference in the availability of credit. Markets are largely expecting these cuts, and many banks are forward-pricing them to attract business. In addition, financial markets’ enthusiasm in the wake of the election result means the long-term yield on assets has been pushed higher, which will buoy interest rates in the short-term as well. 

Conclusion

The medium-term trend is towards more favorable conditions, however, and we expect that to help businesses finance a new wave of investments in later 2025 – 2026 that will bolster their competitiveness and productivity in the long-term.