Investing Insights

SMALL BUSINESS TRENDS  •  February 19, 2026  •  Jon Wolfenbarger

Inflation Pressures Small Businesses And FANG+ Index Is Breaking Down

PARIS, FRANCE — The monthly NFIB small business survey provides a treasure trove of information about current and expected business conditions that is available nowhere else.

Let’s take a look at their latest survey.

Small Business Optimism Ticked Down And Uncertainty Rose in January

In January, the NFIB Small Business Optimism Index fell by 0.2 points to 99.3. That is above the 52-year average of 98, as shown below. While three of the 10 components of the Optimism increased, including a large 6 point increase in expected real sales, 7 components decreased.

The Uncertainty Index rose 7 points to 91 due to increasing owner uncertainty about whether it is a good time to expand their business.

Sales & Earnings Remain Weak And Prices Remain High

A net negative 6% of small businesses had higher sales over the past three months, which was up 2 points from December but still below the historical average of zero. Since small business sales is highly correlated with nominal GDP growth, this implies the economy remains soft. On the positive side, the sales outlook improved significantly, with the net percentage expecting higher real sales rising 6 points to 16%.

Despite better sales, the percentage of small business owners reporting positive profit trends fell 1 point to a net negative 21%, which remains disappointing, as this chart shows.

On the employment front, a net 16% of owners plan to hire workers in the next three months. That is down 1 point from December but above the historical average.

Capital spending increased, which is encouraging. A net 60% had capital outlays in the last six months, up 4 points from December and the highest level since November 2023. A net 18% expect to spend on capital expenditures over the next six months, down 1 point from December.

A net 26% reported raising selling prices, down 4 points from December but still well above the historical average of 13%. Looking ahead, a net 32% plan to increase prices over the next three months, up 4 points. This suggests continuing inflation pressures going forward. 

Small Businesses Are Struggling With Cost Pressures, Taxes & Regulations

The NFIB noted that the AI boom is not leading to a boom for most small businesses, saying the following:

“According to the official statistics, the economy is performing well. GDP is rising smartly while inflation remains relatively low and stable, as does the unemployment rate. Focusing on GDP, the economy is flying. A 4.2% gain in the latest release (Q3 2025) suggests we are in the middle of a boom. But meanwhile, small business owners aren’t “feeling the gain,” or at least not at that level of economic growth. 

The NFIB Small Business Optimism Index hovers just above its historical average. The new Employment Index tells a similar story, with numbers just above their historical average, suggesting a balanced labor market, not a booming one. The official statistics show one story of the economy and small businesses show a more moderated one. 

The “confusion” stems from the details of what GDP really means. This includes consumer spending, government purchases of goods and services, and investment (the creation of new productive assets). For example, new data center construction is booming to support AI growth. As such, one sector could be taking off, while most of the economy is more balanced. Major investment-led growth of one sector is not necessarily shared, and especially not right away. Bottom line, GDP growth is strong, but not equally distributed across the economy. Let’s see if 2026 brings more balance to these trends.”

Most small business owners continue to struggle with cost pressures and tax and regulatory challenges. Here are some of their comments about their current business conditions:

• “Insurance costs- business/liability, and health are having significant increases affecting uncertainty in pricing product.” – Construction, OR 
• “The uncertainty of economic change has people not spending as much or not buying unnecessary products. In addition, tariffs and inflation have caused significant delays in product and increased the prices greatly.” - Construction, WA
• “This country suffers from lack of skilled workers. It is almost impossible to find skilled workers in the automotive repair field.” - Services, MI 
• “Our business has been open since 1968. We are obviously doing something right for our customers. My struggle is passing on the increase in the cost of goods to my customers. That is a daily fight. I have to do it.” - Manufacturing, MI 
• “Obtaining timely city/county permits is a nightmare. Takes months if not years for permits. Insurance eats up any profits, it just keeps going up and in our business we have limited sources that will insure us.” - Construction, CA 
• “All my overhead has gone up significantly. My ability to raise my prices is negatively impacted by all the increased demands on my client’s “discretionary” income. Less taxes, less regulations, less bureaucracy, are the best help to my business and business prospects. Drastically less government spending and reduction of debt.” - Professional services, KS

NYSE FANG Plus Index Is On A Precipice

The NYSE FANG Plus Index is comprised of the following mega cap tech stocks: Apple, Microsoft, Amazon, Alphabet, Meta Platforms, Netflix, NVIDIA, Broadcom, CrowdStrike and Palantir. This Index has been the driving force of the bull market since the 2022 lows, ever since the launch of ChatGPT. If this Index breaks down, it could take the market with it.

The chart below shows the FANG Plus Index has fallen 16% in recent months and below its key 250-day moving average. It is currently on the trend line that has supported the index during its entire three years bull market. If it falls below this precipice, it will likely signal much more downside to come. It has already broken below its trend lines relative to the S&P 500 (second clip) the Special K momentum indicator (third clip).

Investment Implications

The current economic environment, characterized by high costs, continues to be challenging for small businesses. Given this, we recommend keeping a close eye on the FANG Plus Index. If it breaks and the AI bubble bursts, look out below.