A year ago, the bank pulled $3 billion out of its loan-loss reserves due to the economy’s rapid recovery from the pandemic, pushing up profit to $11.95 billion, or $3.78 per share.
Revenue rose 1% to $30.72 billion. That missed the $31.81 billion analysts had expected.
Consumers increased spending on JPMorgan credit cards and kept paying their bills on time, even as the bank moved to prepare for potential future losses.
Market volatility created a boon for trading operations, but dried up the advisory fees for initial public offerings and big deals. Increased interest rates meant its profitability on lending increased, but mortgage underwriting plunged.
Bond yields followed suit. Ten-year yields are back below 3.1% after a spike up to 3.5% in the aftermath of the not-so-surprising policy rate hike of 75 basis points (bps) from the Federal Reserve.
Two-year yields, which are more closely tied to policy rate expectations, plummeted back to 3% for the first time since May’s scorching CPI report. The market-implied expectations for average inflation over the next five years are at their lowest levels of the year, and have fallen 100 bps since their late March peak.
Notably, the speculative equities that have been most sensitive to rising bond yields have been hammering out a bottom. ARKK, the poster child of the current selloff, gained 19% and is now over 26% above the lows.
At first, this all seemed like good news. The market mood has become very sour of late based on the premise that the Fed would have no choice but to cause a recession to tame inflation. Weakness in commodity prices gives policymakers more leeway to change course to avoid causing deeper economic damage.
The problem is that evidence is mounting that a growth slowdown is already well underway. The housing market is cooling very quickly due to higher mortgage rates, and the Purchasing Manager Indices came in well below expectations in June in both the United States and Europe.
The latest data give credence to the idea that a self-reinforcing downturn may be already happening. From the Fed to The New York Times, to Cardi B, everyone sees it coming.