Small business optimism just came in at 104, handily beating Wall Street estimates. This number represents an increase of 3.8% over the prior month and an increase of 2.2% year over year. Small business optimism is now almost completely recovered the COVID losses. This follows the big beat on Consumer Confidence recently.

So far this hasn’t translated to any inflationary pressures. The Core CPI came in as expected, with a year-over-year increase of 1.7%. Which is about the same as last month and still well below the pre-COVID levels.

Q3 earnings season kicked off today. Most notably with Johnson & Johnson and JP Morgan. Both companies beat top and bottom-line estimates. One of the things that stuck out to me was JP Morgan’s loan loss provisions came in well below market expectations and only a fraction of the levels in the prior quarter. This is good news.

Loan loss provisions in Q2 were $10.47 billion, while Q3 was $611 million. One of the major differences between today and 2008 are the banks financial position. Balance sheets are in much better shape, allowing these banks to set aside tens of billions in anticipation of defaults.

I remain underweight the financial sector for many of the oft-cited reasons (regulatory risk, low rates, loss provisions) but own JP Morgan. I own Johnson & Johnson, but it remains one of the stocks I sell to raise cash when other opportunities present themselves. Great company, but litigation costs have kept the stock price mired in mediocrity. The company now has underperformed the benchmark on the 5, 10, and 15-year time horizon as a result.

Lastly, in keeping with the positive theme around here. I leave you with this interesting comment made by Paychex CEO Martin Mucci during their recent earnings conference call:

“I mean, we are certainly seeing as I think just generally in the economy, new business startups are up 20% year-over-year. It’s pretty incredible and I think what we are seeing – what you see and we see it on new businesses is people are shifting. So people are getting out of some businesses, shifting to others or evolving their business and others are seeing opportunities in this environment that they didn’t see before. So new business startups are really growing”

It goes to show how adaptive the US corporate environment can be. There is a lot to look forward to if we can just endure a little while longer.