Corporate Confidence Is Up As Small Business Sentiment Rebounds, Bank Of America Data Shows

Although the SPDR S&P 500 ETF Trust SPY has soared over 17% to record highs in 2024, many macroeconomic and geopolitical headwinds persist. Companies — both large and small — seem to be unfazed, as sentiment remains at elevated levels.

The Data: According to data from Bank of America (relayed by a post on X), sentiment among S&P 500 companies hit a record high in 2024’s first quarter.

Meanwhile, conditions seem to be improving slightly on the small business front. The National Federation of Independent Business (NFIB) Small Business Optimism Index rose to 91.5 in June. While the figure is still far below readings over 100 in 2021 and 2022, recent increases show that small businesses have become at least somewhat more optimistic.

Why it Matters: On the surface, rising sentiment seems incongruent with economic and geopolitical uncertainty.

Recent jobs data showed the U.S. economy teetering with recessionary status. The 2024 presidential election could magnify geopolitical risk if the winner escalates conflict with China; many U.S. companies rely on Chinese suppliers and some fear that a trade war would be inflationary.

Optimism seems to be driven by cooling inflation data, hopes of a September interest rate cut by the Federal Reserve, and expectations of future margin expansion and earnings growth.

According to CME FedWatch, investors place a 73% chance of a September rate cut.

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