THERE have been plenty of swings in financial markets since America’s election on November 8th. The Mexican peso has fallen against the dollar, reflecting worries about Donald Trump’s protectionist tendencies. Ten-year bond prices have tumbled as investors factor in the likelihood of much higher government borrowing. One particularly striking move has been a surge in the share prices of small firms. The Russell 2000 index of American midgets has leapt by 12%, compared with a 3% rise for the S&P 500 index of multinational leviathans (see chart). Small companies are the backbone of America’s economy, employing about half of the private-sector workforce. But they have had a rotten decade. The Russell index had lagged the stockmarket until the election. The country’s 28m small firms—most of them unlisted—have never fully recovered from the financial crisis of 2008. As of October, confidence had yet to rise back to the level of 2006, according to an index of optimism that is based on surveys by the National Federation of Independent Business, a lobbying group. Giant firms, meanwhile, have been playing a bigger role: two-thirds of all industries have become more concentrated since the 1990s.

Mr Trump knows a thing or two about struggling small firms—he runs one. The Trump Organisation would rank about midway in the Russell 2000 for the size of its revenues if it were listed. But there are three more substantial reasons why his administration could help small companies. First, tax. Profitable firms in the Russell 2000 pay a rate of 28% on their aggregate income, according to Barclays, a bank. Large multinationals are skilled at paying lower rates, mainly by stashing their profits abroad. Mr Trump’s plan to cut the corporate rate from the current headline rate of 35% to 15% would help small firms disproportionately. (Big companies, meanwhile, may record lower foreign sales because of the strong dollar.)

Second, the plan to abolish Barack Obama’s Affordable Care Act and to lighten regulation across the board is likely to please the owners of small firms. They rank health insurance and red tape as their two most pressing concerns. Last, the Trump administration is also likely to ease regulations on the local banks that typically supply credit to smaller firms.

A revival of animal spirits among the millions of small companies that already exist would boost America greatly. But the real test is whether more new firms are started. The rate of net company creation has gradually slumped to its lowest level since the 1970s. Among the reasons are a mounting burden of regulation and the difficulty of matching the purchasing clout and pricing power of giants such as Walmart. If over the next four years the administration manages to reverse this trend, it will have made a big step towards restoring the dynamism that made America’s economy great.