Some of the nation’s top bankers struck upbeat tones on the US consumer and their own earnings this week while voicing uncertainty about the road ahead for the US economy.
In the backdrop of the predictions: A report from the Bureau of Labor Statistics on Tuesday showed that the US added nearly a million fewer jobs than initially reported in the monthly payroll report for the 12-month period ending in March 2025. The massive revision came only days after the preliminary payroll report showed that the US added just 22,000 jobs in August.
“The economy is weakening, whether it’s on the way to a recession or just weakening, I don’t know,” JPMorgan Chase CEO Jamie Dimon told CNBC around noon on Tuesday. Dimon said the payroll revision was “big” during the interview, which took place on the steps in front of JPMorgan’s enormous new Park Avenue headquarters in New York City.
Not cheery about the economy: JPMorgan Chase CEO Jamie Dimon. (Michel Euler/Pool via Reuters/File Photo) ·Reuters / Reuters
Meanwhile, several blocks away, at a financial services conference hosted by Barclays, the country’s largest bank delivered a more upbeat message on its third quarter earnings.
“We feel there’s a lot of animal spirits at the moment,” said Doug Petno, co-head of JPMorgan’s commercial and investment bank. “You would not have robust markets that we’re having if people were sort of running for cover.”
Speaking just hours before Dimon on Tuesday, Petno said JPMorgan expects its two major Wall Street businesses, investment banking and trading, to rise in the third quarter compared with the year-ago period. Revenue from the bank’s Markets division, which houses the bulk of its trading activity, is projected to rise in the “high teens” from the third quarter of 2024, putting the bank on pace for record trading fees in 2025.
Other executives for major Wall Street banks delivered similarly upbeat third quarter earnings guidance on their large trading and investment banking operations.
“We’re not finished yet with September, but I would think we’re gonna have a good investment banking quarter,” Bank of America CFO Alastair Borthwick said Monday.
Read more: Money market accounts with interest rates of 4% APY and higher
Not finished: Bank of America CFO Alastair Borthwick addresses attendees during the Celebrating US Soccer in New York City event at Bank of America Tower on March 12. (Howard Smith/ISI Photos/USSF/Getty Images for USSF) ·Howard Smith/ISI Photos/USSF via Getty Images
Wall Street banks have rallied for most of this year, thanks in large part to their fee businesses, which include trading, dealmaking, and other brokerage services. Lender revenue has been boosted by a combination of record-high asset prices and corporations seeking to issue debt, execute mergers, and even go public.
Shares of JPMorgan (JPM), along with rivals Citigroup (C), Wells Fargo (WFC), Bank of America (BAC), and Goldman Sachs (GS), are up between 15% and 38% this year, outperforming major indexes.
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In recent weeks, optimism that the Federal Reserve will begin lowering interest rates this month has also fueled a “catch up trade” among regional lenders, Bank of America equity analyst Ebrahim Poonawala wrote in a Tuesday note.
But can the good times continue to roll? It depends on the health of the US labor market, Poonawala wrote. There is “no bigger driver for higher credit losses than rising unemployment,” he said. So far this year, he added, diminishing credit quality at major banks so far this year has been “a non-event.”
“I still very much feel that the consumer is an anchor of strength, I think, in our current economy,” Capital One CEO Richard Fairbank said Tuesday afternoon. Fairbank added that “waves of layoffs” would be his next great concern to see, given the US economy’s weaker job creation.
Read more: How jobs, inflation, and the Fed are all related
Concerns about layoff waves: Capital One founder and CEO Richard Fairbank. (Marvin Joseph/The Washington Post via Getty Images) ·The Washington Post via Getty Images
Traders expect Federal Reserve officials to lower interest rates by a quarter of a percentage point when they meet next week, with more cuts coming later in the year, according to the CME Fedwatch.
“It just doesn’t feel to me like the policy rate is extraordinarily restrictive at the moment,” Goldman Sachs CEO David Solomon said during the Barclays conference on Monday afternoon. “Risk appetite is definitely out on what I’d say is the more exuberant end of the spectrum,” Solomon added.
The bank’s chief economist and others are clearly not rosy when it comes to the economy and its rate of growth.
Goldman’s Jan Hatzius told Yahoo Finance’s Brian Sozzi on Monday that the economy is “close to stall speed.” Pittsburgh-based PNC CEO Bill Demchak said in an interview with Yahoo Finance that “we’re just not creating new jobs, and that’s starting to worry, appropriately, Fed officials.”
PNC’s official forecast is that between September and January, the Fed will lower interest rates by a full percentage point, though Demchak is more skeptical of that amount of cuts.
The greatest worry about cuts for Demchak is that as the Federal Reserve begins shrinking its balance sheet, longer-end Treasury bonds like 10- and 30-year notes continue to sell off, and “that is exacerbated by the impression that there’s political pressure on the Fed to cut rates,” Demchak told Yahoo Finance.
He added, “Fed independence is sacrosanct.”
David Hollerith covers the financial sector ranging from the country’s biggest banks to regional lenders, private equity firms, and the cryptocurrency space.
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