Is The Biggest Bank Stock By Market Cap A Buy After Fed Rate Hike?

JPMorgan Chase’s (JPM) recent rebound has held up with the broader market, as investors try to get a read on the economy, oil prices and how the Federal Reserve might tackle decades-high inflation. So is JPM stock worth buying right now?


U.S. unemployment claims last week fell to lows not seen since 1969. But Fed chair Jerome Powell this week didn’t rule out rate hikes that are bigger than the quarter-percentage-point increments expected this year.

“If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so,” he said at an economic policy conference on Monday.

Meanwhile, the U.S. and G7 leaders this week met in Brussels and intensified their efforts to isolate Russia’s economy following its invasion of Ukraine. But oil prices have eased, for now.

“Crude prices are declining as energy traders expect that after all the EU leader, NATO, and G7 meetings, Russian energy will not be sanctioned anytime soon,” said Edward Moya, market analyst at OANDA.

Earlier this month, the Fed raised its key interest rate for the first time since 2018. The central bank’s policymakers, at that time, also indicated their expectations for seven quarter-percentage-point rate increases this year. They see at least three more next year.

Higher interest rates from the Fed allow banks like JPMorgan to raise their own interest rates on things like credit cards and auto loans. When the Fed raises its key interest rate, it makes borrowing money more expensive. That can rein in an economy that might be running too hot. But it also runs the risk of damaging the economy overall.

Prices have risen following a flood of pandemic-related stimulus aid and strains on the supply chain that pushed up shipping costs, after many consumers, bored and stuck at home, began buying more goods. Russia’s invasion of Ukraine last month also sent oil prices soaring.

JPMorgan Earnings

JPMorgan in January also reported mixed fourth-quarter results. Earnings per share beat expectations. But revenue missed.

A big increase in merger deals and a strong IPO market lifted investment banking. But markets revenue fell, after a jump in 2020. Rising costs — to attract and retain employees, open new branches and bolster JPMorgan’s technology — also worried some analysts.

Management also said its return on tangible capital equity, another profitability gauge, could stay below its target of 17% for the next one to two years, as inflation persists, markets return to earth and other spending by the bank continues. That outlook came despite a still-strong economy.

JPMorgan is the biggest U.S. bank by market value. But despite the bank’s reputation, JPMorgan stock has largely trailed the S&P 500 since 1986. Here’s a breakdown of the JPM stock chart and financials.

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JPM Stock Fundamental Analysis

JPMorgan stock has a 50 Composite Rating, on a 1-99 scale, with 99 tops. Its EPS Rating stands at 64.

IBD encourages investors to focus on stocks with Composite Ratings of 90 or higher.

The stock’s SMR Rating is a C, with ‘A’ the highest possible rating.

JPMorgan Stock Technical Analysis

JPM stock is currently trading at around 140.

The stock, and its relative strength line, have wobbled in recent days. Longer term, the RS line shows that JPM stock has largely moved in line with the market going back to 1998, or even 1986.

That’s also a problem for banking giants such as Citigroup (C), Goldman Sachs (GS) and Bank of America (BAC). While bank stocks benefit in tandem with the economy, if the economy is doing well, so will the stock market generally.

Long-term outperformance has been ephemeral for JPM stock, even though it has generally outperformed its big peers.

Put another way, if you bought the SPDR S&P 500 ETF (SPY) back in 1998, you’d have the same or better returns with far less risk.

JPMorgan stock and its rivals can have periods of outperformance, as they did near the end of 2019. JPM stock, Goldman Sachs, Bank of America and others outperformed the market from April 2016 to March 2017, with most of those gains following former President Trump’s surprise election victory.

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Is JPM Stock A Buy?

JPMorgan has a market value of around $413 billion, according to MarketSmith. Its business is a one-stop financial shop for Wall Street and Main Street. But the stock is not in a base.

Bottom line: JPM stock is not a buy right now, based on IBD’s chart analysis.

Like other big banks, JPMorgan also has a poor record when it comes to beating the market for long stretches.

Check out IBD Stock Lists and other IBD content to find dozens of the best stocks to buy or watch.

Follow Bill Peters on Twitter at @IBD_BPeters.


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