JPMorgan’s share price peaked in September 2021, and it has been trending lower since. Banks usually outperform in environments where interest rates are rising or at least where the perception is that rates will be lifted. In the last few months of 2021, there was increasing chatter the Federal Reserve would hike rates. In October 2021, the US 10-year yield increased to a five-month high, indicting the bond market was predicting higher interest rates, but that did not stop the decline in the JPMorgan share price. One could argue that was a warning that things were about to get worse for the stock seeing as it was falling amid rising yields. Since March 2022, the Fed have hiked rates three times. In that time frame, rates have been lifted by 150 basis points, and there is talk of another large lift this month. The money markets are factoring in a high probability of a 75% hike. That being said, the JPMorgan share price fell to an eight-month low last week.
The bank announced its first quarter numbers in April and even though the main metrics were pretty good, there were some concerns about the outlook. In the three-month period, revenue cooled by 5% to $31.59 billion, beating the $30.86 billion forecast. Earnings per share came in at $2.76, ahead of the $2.69 estimate. Fixed income and equities trading revenue were $5.7 billion and $3.1 billion respectively, both easily beating analysts’ forecasts. The tick up in bond yields is helping the group as net interest income – the lending margin – rose by 7% to $13.97 billion.
Asset valuations were marked down because of Russia’s invasion of Ukraine. In a sign of the times, JPMorgan took a $902 million charge in connection to anticipated loan losses. Jamie Dimon, the CEO, cautioned there are major economic and geopolitical challenges ahead, due to high inflation, partially because of the war in Ukraine. The downbeat outlook weighed on sentiment. Mr Dimon also said the bank would be building up its credit reserve because of an increased risk to the economy. There are creeping concerns the US economy could be edging towards a recession, and should that be the case, the bank could face problems like, a spike in bad debts, a fall IPOs and a drop in mergers and acquisitions.
JPMorgan’s share price is in a downtrend and if the bearish move continues, it might find support at $105.60 or $100.00. If the stock rallies, it might encounter resistance at $120.51 or $129.40.
The bank will announce its second quarter figures on 14 July.