Your number one priority is to keep your small breeed puppy safe. That means picking them up if an unknown dog (especially a large breed dog, but even a small one can cause damage to a puppy) charges at you. At very best, it's terribly impolite behavior, and the owner should have better control. At worst, if a large dog grabs your puppy and shakes it, your puppy can be dead in an instant. So, yes, we want to encourage our pups to be brave and approach the world with a sunny, outgoing attitude, but it's NOT unreasonable for even a "fearless" puppy to be afraid in some situations. That's just a sensible sense of self-preservation, not a sign of being "shy" or over-all fearful.
One thing tah can be very helpful in a situation like this is to ALWAYS have a pocketful of kibble or small, loose treats in your pocket when you are out and about with your puppy. If you see a loose dog charging toward you (often with its owner running far behind saying, "don't worry, he's friendly!"
) pick your pup up and quickly throw the treats right toward the approaching dog's face. More often than not, the sudden appearance of food will distract the dog long enough for the owner to catch up, and/or for you to get yourself and your pup in a safer position.
Another place where I carry puppies pro-actively is if I have to walk by a yard where I know there is a large dog behind an invisible fence. First, invisible fences MAKE the enclosed dog reactive, so they are more likely ro run along their boudary line acting territorial and aggressive. Second, a really ramoed up dog may charge right through an electric fence, and then you've got a real problem. Third, even if YOU know the invisible fence is there, and you TRUST that the dog won't charge through it, there is no way for your puppy ro understand that. All they see is a very threatening dog charging toward them.
I try to avoid dogs behind invisible fences as much as possible, but in suburban settings, it's hard to go for a walk ANYWHERE without encountering some of them. So If I am walking past toward one of these houses, And I see the dog is out there, I pick up the puppy before the dog living there has a chance to alert on them and make a ruckus. The dog behind the fence MAY bark at a human going by carrying a puppy, but they are much less likely to get puffed up and territorial than if the puppy is on the ground and a perceived rival. And you are in a better position to handle your puppy calmly than to wait until they have GOTTEN afraid, and then try to deal with it.