Small businesses in the U.S. are on fire, even if the stock market is shaky, "Shark Tank" investor and entrepreneur Kevin O'Leary told CNBC on Friday.

"Small domestic companies are the unsung hero of the policy that's emerged from this administration," O'Leary said on CNBC's "Power Lunch."

When President Donald Trump took office, he pledged that he would pare down regulations on U.S. businesses. While the actual moves toward deregulation haven't been quite as ambitious as planned, the approach has won him converts in the business community.

A recent reading from the National Federation of Independent Business was the second highest in history dating back 45 years. Small business owners reported aggressive hiring plans, the only obstacle to which has been a dearth of labor supply. The end of June saw 6.7 million job openings and just 6.6 million Americans classified as unemployed, an unprecedented imbalance.

"We are having the best year ever — ever in the last decade," O'Leary said. "The deregulation in the state and the municipal and the federal level has given confidence to these operators to do something they haven't done in 10 years: to actually take out loans and invest in their businesses, and create jobs, and increase sales, enhance margins, scale up."

John Shrewsberry, CFO of Wells Fargo, commented that the stock market, which has had a volatile week, seems detached from the overall health of the economy.

"We're on fire right now — in the high 3 [percent economic growth] this year and probably into next year as the benefits from tax reform and still relatively low rates are being expressed. Our own call is for things to begin to slow down as a result of rate increases after the end of next year," he said on CNBC's "Closing Bell."

"The sell-off in the stock market seems completely detached from what's happening in the real economy," Shrewsberry added.

Concerns over rising interest rates and trade tension with China have rattled markets throughout the past few days. On Thursday, Wall Street closed sharply down, with the Dow falling over 540 points, On Friday after posting solid losses over the last two sessions.

O'Leary added that private business owners "aren't worried about the stock market, they are just killing it in their businesses."

If tariffs rise by 25 percent across the board in January, O'Leary said, small business owners will likely feel the burn. But he said there is still room to grow for private businesses.

"My private investments are way outperforming the public markets — by miles. We are getting 11, 12, 14 percent increase in free cash flows — and we haven't even had the effect of tax reform yet. I'm just talking about deregulation," he said.

Since he's making a lot more from private investments than he is from the markets, O'Leary said, he's going to continue with that investment approach.

"I'm telling you, America is on fire," O'Leary said.

— CNBC's Jeff Cox contributed reporting.