Small business owners are expressing a more positive outlook on the economy, with confidence reaching its highest level since President Joe Biden took office in 2021, as quoted on CNBC. According to the latest quarterly data from the CNBC|SurveyMonkey Small Business Survey, economic confidence among small business owners is on the upswing.

Against this upbeat backdrop, investors can play top-ranked stocks like Universal Technical Institute (UTI Quick QuoteUTI - Free Report) , SunCoke Energy (SXC Quick QuoteSXC - Free Report) , Healthcare Services Group (HCSG Quick QuoteHCSG - Free Report) , First Bank (FRBA Quick QuoteFRBA - Free Report) and American Public Education (APEI Quick QuoteAPEI - Free Report) .

Positive Economic Sentiment

About 28% of small business owners now view the current state of the economy as "excellent" or "good," marking a considerable increase from the previous quarters and a notable jump from the previous year. This surge in optimism represents the highest level of confidence recorded since the inception of the CNBC|SurveyMonkey survey in Q2 of 2022.

Encouraging Trends

The Small Business Confidence Index, with a reading of 47 out of 100, has touched its peak since President Biden took office in Q1 of 2021. Despite lingering challenges such as inflation, recent data indicates a growing sense of confidence among consumers and small business owners regarding the economic landscape.

Inflation Poses Challenges but Fed Policy Productive

While optimism is on the rise, inflation remains a nagging concern for small business owners, with nearly a third identifying it as the most significant risk to their businesses. However, there is a cautious sense of optimism regarding inflation and overall costs, with confidence in the Federal Reserve's ability to control inflation successfully.

Will Fed Cut Rates in Late 2024?

While large-cap stocks are hitting all-time highs, attention has turned to the Federal Reserve's stance on interest rates. While a parade of Fed officials has hinted at future rate cuts, they differ on the timing of such moves. Despite indications of impending cuts, investors are now reassessing their expectations, with Goldman Sachs revising its projections downward (per a Yahoo Finance article).

The consensus now points to three rate cuts for 2024, down from the previous expectations of six, as inflation data and cautious Fed comments prompt a change in market forecasts. The Fed may start cutting rates in late 2024.

Stocks to Buy

Against this backdrop, below we highlight a few small-cap stocks that are currently must-buys. These small-cap stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Moreover, these stocks have seen positive earnings estimate revision for the upcoming quarter in the past month. These stocks have a lower P/E than the S&P 500 (i.e., 23.01X). These stocks have the best VGM Score of A.

Universal Technical Institute – Zacks Rank #1; P/E: 21.48X

The company provides technical education training in automotive, diesel, collision repair and refinishing, motorcycle, marine and personal watercraft technologies. The stock has seen a 25% increase in earnings estimate for the upcoming quarter in the past 30 days.

SunCoke Energy– Zacks Rank #2; P/E: 12.60X

SunCoke Energy, Inc. is a producer of metallurgical coke in the Americas. The company acquires, owns, and operates the coke-making and coal-mining operations. Its coke-making facilities are in the United States and Brazil. Its earnings estimate for the March quarter has jumped from $0.12 to $0.22 in the past month.

Healthcare Services Group – Zacks Rank #2; P/E: 14.11X

Healthcare Services Group, Inc. provides housekeeping, laundry, linen, facility maintenance and food services to the healthcare industry, including nursing homes, retirement complexes, rehabilitation centers and hospitals.

First Bank – Zacks Rank #1; P/E: 7.55X

First Bank is a state-chartered bank with five full-service branches. It provides personal and business banking services in New Jersey. The bank offers checking, savings and money market accounts, auto and home loans, home equity line of credit, fixed-rate home equity loans, lines of credit, term loans, commercial mortgages, letters of credit, merchant services, and construction finance. The bank’s earnings estimate for the upcoming quarter has gone up by 3 cents to $0.43 in the past month.

American Public Education – Zacks Rank #2; P/E: 19.87X

American Public Education, Inc. is an online and campus-based postsecondary education provider. The company serves approximately 108,400 students through three subsidiary institutions. The earnings estimate of the company for the upcoming quarter has risen 7.7% in the past month.