Chart of the Week

Optimism grows among small businesses

September 16, 2025

Time to Read: 3 min

The S&P 500 is trading at record highs, which some investors didn’t see coming after the tariff-fueled drop in April. What may come as a bigger surprise, however, is the rally is broadening beyond big technology companies. Let’s examine different measures that prove this point.

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There is a debate among economists about whether growth resilience will weaken heading into the fourth quarter and 2026. While we recognize that job growth has slowed, we find improving business confidence a positive sign for future growth

The NFIB Small Business Optimism Index, a measure of sentiment among small companies, fell sharply from December to April as policy uncertainty spiked. Since April, confidence among small businesses has improved and is now at its highest level since February.

In our view, despite slowing jobs growth, the economy is showing signs that the outlook heading into 2026 is improving. Earnings are strong and growing stronger, and companies only stand to benefit from easing monetary policy. Though gross domestic product may fall short of 2024 performance, we anticipate it will come in positive this year between 1.5%-2%. While we believe improving small business optimism is positive for growth, we will continue to monitor the attitudes of small business owners, watching to learn whether recent momentum can persist.

Chart of the Week | Macroeconomic

Is the market rally broadening?

Stocks, as measured by the S&P 500, are up over 13% through early August. The solid gains have been fueled by a resilient economy, steady consumer spending, optimism around artificial intelligence and better-than-expected earnings growth. Still, some investors worry the advance may be too concentrated in technology and that AI-capex monetization may fall short of expectations. A closer look suggests that it is not just tech moving the market higher.

Chart of the Week | Macroeconomic

Fed friction?

Markets are navigating tensions between a Fed that offers less guidance and an inflation backdrop that remains sticky. Added uncertainty from Middle East tensions and energy-price swings is further shaping sentiment, with recent moves in Treasury yields suggesting the market wants the Fed to hike. However, with yield volatility expected to linger in the near term, we see today’s elevated Treasury yields as an especially compelling opportunity in fixed income.

Chart of the Week | Macroeconomic

Sizing up small caps

Small caps have outperformed this year despite the threat of higher interest rates, suggesting the rally is being driven by more than just diversification away from large cap tech stocks. Improving earnings expectations and a resilient U.S. economy support our view that small caps have further upside from here.

Chart of the Week | Macroeconomic

Muni yields are attractive

The war in Iran has increased volatility across fixed income markets, pushing municipal bond yields higher as investors reassess inflation risk, energy costs and the path of Federal Reserve policy. Even so, historically elevated municipal bond yields present a compelling opportunity for tax-sensitive investors.