JPMorgan stock has moved higher over the past several months, fueled by hopes for an economic rebound and higher interest rates. So is JPM stock worth buying right now?
JPMorgan Chase (JPM) is the biggest U.S. bank by market value. Markets see it as a window into U.S. consumer spending and corporate sentiment. When JPMorgan CEO Jamie Dimon offers his thoughts on the economy, investors listen.
The bank’s fourth-quarter earnings also beat expectations, and it also plans to buy back $30 billion in shares this year, after the Federal Reserve found it and other banks were solid enough to withstand a severe recession.
However, 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.
Stimulus Lifts JPM Stock, Bank Stocks
Momentum has built for President Biden’s $1.9 billion aid plan. The Senate cleared the stimulus plan on Saturday. The House is expected to vote on the Senate version this week, sending it to President Biden’s desk.
The stimulus has lifted hopes for a speedier economic recovery, after the pandemic left millions jobless last year. However, some economists have raised concerns that the stimulus could lead to inflation, especially with prior stimulus efforts and accelerating vaccinations efforts spurring a recover already.
The Federal Reserve has signaled that it’s not especially concerned about inflation. So far it’s not show an inclination to curb ongoing monetary stimulus, while actual rate hikes are seen as years away.
But while the official Fed funds rate is anchored at 0%, keeping short-term market rates extremely low, longer-term markets have picked up substantially from last year’s historic lows. Traders, optimistic about an economic recovery, have fled more cautious investments like government bonds, pushing their yields — or expected returns — higher. Longer-term Treasury yields tend to rise as investors demand more in return to offset the dollar’s shrinking buying power down the ro
With the 10-year Treasury yield now at 1.6%, still tame by historic standards, the spread vs. short-term Treasury yields has widened considerably.
That helps banks’ lending profitability, by borrowing short and lending long.
JPM Stock Fundamental Analysis
Earnings growth is a key characteristic of top stocks. Analysts expect JPMorgan earnings to grow 20% this year.
The pandemic’s shutdown of the economy has threatened people’s ability to keep up with bill payments. Earnings for JPMorgan plummeted during the first half of last year, but later rebounded. Banks set aside billions last year to cover souring loans as the pandemic sank in.
JPMorgan’s reserves in the second half of last year were smaller. Vaccinations have begun. But health experts are worried about coronavirus variants.
Meanwhile, the odds of tougher regulations have grown under President Biden, a Democrat-controlled House and a Senate in which the party controls 50 seats. But even before the election, analysts said any new regulations likely wouldn’t be as tough as those passed in the wake of the 2008 financial crisis.
JPM Stock Vs. Fintech
But JPMorgan is rolling out more mobile payment functions to mirror the fintech upstarts. In October, JPMorgan launched its mobile payment service QuickAccept.
Also in October, JPMorgan said its digital currency had been put to commercial use for the first time. The bank has launched a new business around the technology underpinning the coin.
JPMorgan Stock Technical Analysis
JPM stock rebounded off its 50-day line in late January. The stock’s relative strength line rebounded at that time as well.
JPMorgan’s stock chart has been messy over the past year. Shares have moved above a 141.20 buy point of a long cup base. JPM stock is extended from that entry, hitting fresh all-time highs on March 8.
Longer term, however, 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). Banks tend to prosper along with the economy. But 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 had bought the SPDR S&P 500 ETF (SPY) back in 1998, you’d have the same or better returns with far less risk.
But 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.
JPM stock has outperformed the S&P 500 since late September and especially since after the Nov 3. election.
JPM Stock Vs. Other Bank Stocks
JPMorgan stock has a mediocre 79 Composite Rating, on a 1-99 scale, with 99 tops. Its EPS Rating, according to MarketSmith chart analysis, stands at 81. IBD encourages investors to focus on stocks with Composite Ratings of 90 or higher.
Morgan Stanley (MS) has a Composite Rating of 89. Its EPS Rating is 96. Goldman Sachs stock has a Composite Rating of 86, with an EPS Rating of 89. The two rivals are the highest-rated big bank stocks by Composite Rating.
Citigroup stock has a 61 Composite Rating and a 54 EPS Rating. Among the other big banks, Bank of America has a 72 Composite Rating and an EPS Rating of 58. Wells Fargo has a Composite Rating of 46 and a 24 EPS Rating.
Is JPM Stock A Buy?
JPMorgan has a market value of around $473 billion, according to MarketSmith. Its business is a one-stop financial shop for Wall Street and Main Street.
JPMorgan earnings is benefiting from widening Treasury yields and an economic recovery. While trading revenue saw a spike during parts of last year, it is volatile and not a steady growth driver.
Bottom line: JPM stock is not a buy right now, as it is extended from a buy zone. JPMorgan stock is worth watching as economic recovery plans lead. However, JPM stock, like other big banks, has a poor record when it comes to beating the broader market for long stretches.
YOU MIGHT ALSO LIKE: