Wall Street is minting money as Main Street struggles with inflation and burnout
JPMorgan Chase posted strong results for the fourth quarter Friday, including a $10.4 billion profit that topped forecasts. Still, JPMorgan Chase’s earnings were down 14% from the same quarter the previous year as trading revenue fell.
“The economy continues to do quite well despite headwinds related to the Omicron variant, inflation and supply chain bottlenecks,” Dimon said in a statement. “Credit continues to be healthy … and we remain optimistic on US economic growth as business sentiment is upbeat and consumers are benefiting from job and wage growth.”
JPMorgan Chase and other big banks are benefiting from rising interest rates, which makes their loans more profitable — and an economy that has bounced back from the depths of the credit recession. Commercial lending rates have been rising in anticipation of Fed rate hikes this year.
JPMorgan Chase also posted strong increases in advisory fees thanks to a booming environment for merger activity as well as strong demand for initial public offerings. JPMorgan Chase said that global investment banking fees rose 37% from a year ago.
But rising interest rates could slow the recovery. The Federal Reserve has hinted that it will boost rates three or even four times this year.
Dimon said in response to a question from CNN’s Matt Egan that the Fed has to “to thread the needle” to make sure that it can keep inflation in control and not slow the economy too much.
Still, Dimon added in a follow up question from CNN Business that the economy is in much better shape now than in March 2020 and that we should “count our blessings” about that.
Dimon said he was not going to spend too much time worrying about what the Fed will do and when because it would be a “waste of time to do so.”
However, Dimon sang a slightly different tune during a conference call with analysts later Friday morning, saying he thinks there is “a pretty good chance there’ll be more than four” rate hikes this year — and potentially as many as six or seven.
“This whole notion that somehow it’s going to be sweet and gentle and no one is ever going to be surprised…I think it’s a mistake,” Dimon said about the current expectations of slow, gradual and telegraphed rate hikes.
Wells Fargo tops forecasts
Rival Wells Fargo also reported solid results Friday. Earnings and revenue topped analysts’ expectations. The bank has been taking steps to repair its public image after a bruising series of scandals that hurt its reputation and made it the target of more scrutiny and regulation in Washington.
“The changes we’ve made to the company and continued strong economic growth prospects make us feel good about how we are positioned entering 2022,” said Wells Fargo CEO Charlie Scharf in a statement. “But we also remain cognizant that we still have a multiyear effort to satisfy our regulatory requirements — with setbacks likely to continue along the way — and we continue our work to put exposures related to our historical practices behind us.”