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Optimism Grows Among Small Businesses

September 16, 2025

Time to Read: 2 minutes

Small businesses are becoming more optimistic, a positive indication at a time when economists are debating whether growth will slow. We view this confidence as a positive signal for future growth.

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.

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Is the Job Market Stabilizing?

After sluggish job growth in 2025, investors are looking for signs that the labor market may be stabilizing. With consumer spending driving 70% of economic activity, an improving labor market is essential to sustaining economic growth.

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Will Markets Remain Resilient?

Global equities have risen an annualized 11% since 2020 despite repeated shocks, as resilient growth and earnings have helped markets recover from periods of volatility. While the U.S.-Iran conflict poses near-term inflation and growth risks, markets remain constructive as earnings expectations continue to improve.

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Earnings Breadth Still Improving

Rising earnings estimates continue to support equities despite geopolitical and macroeconomic uncertainty. With profit growth broadening across S&P 500 industries, resilient corporate earnings underpin our constructive outlook for the stock market.

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Global Momentum in Manufacturing

April PMIs (purchasing managers’ indices) point to a meaningful improvement in global manufacturing momentum, with the U.S., Eurozone and Japan all posting stronger-than-expected and firmly expansionary results. The breadth of the rebound suggests improving global demand, supporting our constructive outlook outlook for growth despite ongoing geopolitical tensions.

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WI-804812-2025-09-16

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