SmallCap stocks remain on a bullish trend, with the Russell 2000 flying to new record highs in recent weeks. The widespread explanation is that their outperformance reflects investors coming back to a Stay Home investment strategy from a Go Global one. That makes sense to me given the challenges to the global economy posed by the Fed’s tightening, the strengthening dollar, and Trump’s protectionist saber-rattling.

Also boosting SmallCaps are Trump’s deregulation and tax cuts for business. The forward earnings of the S&P 600 SmallCaps has been soaring to record highs since the enactment of the Tax Cut and Jobs Act late last year.

The National Federation of Independent Business’ May survey of small business owners showed they were ecstatic last month. The percent reporting higher minus lower earnings over the past three months soared to 3% in May. That might not seem like a big deal, but it is because that’s the highest reading on record going back to 1974! The percent who said that taxes are their most important problem was at 16.0%, based on the three-month average, holding around April’s record low. The three-month average in the percent saying that government regulation is their number-one headache dropped to an eight-year low of 13.3%.