JPM’s Strong Share Performance: Is This Masking the Major Issues Faced by the US Economy?
Despite the COVID-19 pandemic causing havoc to economies across the world, JPM has posted stronger than expected revenue gains and a large jump in earnings per share. There’s just one question: Why has the organization performed so well despite the chaos around them?
Well, this could be primarily down to their active trading division. JPM, along with Goldman Sachs, has a top-tier trading division. While volatility has decreased significantly since last quarter, the market has made huge moves – the type that JPM’s trading team has been able to use to pull money from for their benefit.
Yet their trading performance is masking weaknesses in other areas. For instance, JPM has only set aside $611 million in credit reserves – a massive drop from the previous quarter. $611 million might sound like a lot to the average person, but it’s only covering a little over 600 one-million-dollar homes defaulting. The general opinion is that the $611 million figure should be at least doubled for a more conservative approach.
The heart of America is being ripped apart
The heart of America’s economy is small businesses. Yet more and more of these businesses are closing at an alarming rate due to the pandemic. Plus, if another round of stimulus doesn’t come around, even more of these outlets are going to struggle to keep operating and generating employment – and this will ultimately damage the country’s income levels.
Stimulus is a necessity to see the country through this current rough patch. If the government doesn’t come up with a stimulus package, most individuals’ lifestyles and finances will suffer drastically.
It’s also startling at how few people with office jobs have returned to work as normal. Going back to JPM, it is said that only 20% of their employees have gone back to their corporate office.
All of these signs point to an America that has changed forever in terms of how it works.
A closer look at other markets
JPM and Goldman Sachs might both be performing above expectations, but it’s far from that situation across the board. To use two major examples, the financial (XLF) and banking (KRE) sectors’ exchange-traded fund is miles away from their February highs earlier this year. These sectors are key to the US economy. So if their shares are not bouncing back, it’s a big warning sign of potential long-term weakness to come. Using the daily chart as reference, both sectors are trending lower under their 200-day moving average.
Going back to the Great Recession, the US experienced a financial crisis between 2008 and 2009, and it took a long time to recover. The signs suggest both financial and banking are going to experience another bear market. We’re in the middle of another financial crisis, so it’s expected for the financial sectors to be the first to buckle and breakdown.
Not every financial sector will experience a crisis, of course. As this Bitcoin Revolution review highlights, users experience an average 88% win rate when utilizing the software to invest in cryptocurrency. While there is no guarantee for how the US economy will look in the future, and the scale of the damage of COVID-19 has yet to be measured, experts suggest cryptocurrency could be a safe haven during the chaos.