Banks have been thriving so far in Trump’s economy. Here is what it means

Almost wherever you look in the world of finance, things are surprisingly well – at least for the moment.

Wall Street hums thanks to a boom in the exchange of stocks and bonds and management of companies acquiring competitors and contracting massive loans. At the same time, Street Main resists while the American consumer continues to spend, borrow and reimburse loans, according to reports of the largest American banks.

This is an unusually profitable environment for financial companies. The six largest American banks have generated around $ 39 billion in the second quarter, exceeding analysts’ expectations and skipping more than 20% of basic income a year ago.

It is a remarkable result after a tumultuous start in the quarter. The period began with shock and diving markets on April 2 on the radical prices of the “liberation day” of President Donald Trump. JPMorgan Chase Economists said at the time that policies would likely cause a recession this year.

But the markets evolved after Trump responded to distress signals from American bonds and delayed the most punitive prices of most business partners. Investors began to eliminate the dam from administration’s tariff declarations as a fanfaron or noise, and business leaders are moving away from the key to carry out transactions of several billion dollars, according to bank results.

“Look how far the world arrives in three months,” Wells Fargo Banking analyst Mike Mayo told CNBC. “Throughout the quarter, you have had a collection in the investment bank, the growth of loans and optimism with economic scenarios. Here we are, with an almost absent recession.”

This dynamic was clear at JPMorgan, the largest and most profitable American bank. It produced about $ 15 billion in quarterly profits, which represents almost as much as the three largest combined banks.

Trading benefited from turbulent conditions during the quarter while Trump has gone around the markets with rapidly evolving policy declarations. But the real surprise came from the investment bank, which involves mergers, IPOs and debt and the emission of equity. JPMorgan’s revenues jumped 7%, producing $ 450 million more than analysts expected, just a few weeks after managers had warned of about 15%.

“The collection of investment banking fees, to a certain extent, reflects people who accept uncertainty and decide to move on,” said transactions on Tuesday, “JPMorgan, Jeremy Barnum.” The business community has sort of admitted that it just needs to navigate through it. “

But the good news did not end with the confidence of companies. The internal JPMorgan barometers for American economic risks were cooled in the first quarter, because some of the worst scenarios were removed from the table, said Barnum.

This means that it is less likely that a recession will increase American unemployment this year, harming consumers the ability to repay their debts. This was clear in the provision of the bank for credit losses, which was 14% smaller than in the first quarter.

The economy is squarely in the scenario “Landing Soft”, said Barnum to journalists this week.

At the same time, consumers and companies take more money from JPMorgan, where loan growth increased by 5% compared to a year ago, fueled by the increase in credit cards and wholesale loans, the bank said.

These statistics mean that, at least for the moment, the banks give the very light signal on the American economy in the first months of the second presidency Trump. Even in a period marked by turbulence and an increase in geopolitical risks, the economy challenged expectations of a slowdown.

“Banks are economically sensitive companies, and therefore the way in which the economy works under the administration will be important for their results,” said Matt Stucky, portfolio director for the actions of Northwestern Mutual Wealth Management. “Until now, the economy continues to move forward.”

The situation has even made JPMorgan CEO Jamie Dimon, who frequently warns the risks he sees, seems relatively optimistic about the economy.

“It has been resilient, and I hope it will continue to be,” Dimon told journalists this week. “It is always good to hope for the best, to prepare the best, and we will see … One thing I would emphasize, the world is much larger and much more diverse” now and that is a “a little more stable world economy than you had 20 years ago,” he said.

The Trump spending bill, signed this month, preserves corporate tax rates and widens commercial deductions. In addition to that, deregulatory efforts in industries will strengthen the economy, said Dimon.

Last month, the Federal Reserve published a proposal to modify the capital that banks must have for low -risk assets, potentially releasing billions of dollars for banks they could use to stimulate share buyouts, buy competitors or feed more loan growth, the leaders said this week.

Taken together, it is difficult to design a better configuration for banks than at the moment, said Barnum.

“We mainly shoot all cylinders,” said Barnum to analysts. “Rates are a good level for us. The activity of the agreement is high. Capital markets are very strong. Consumer credit is excellent. Bask credit is excellent.”

Admittedly, feeling can move on a penny and risks, including inflation, American deficit and geopolitical disorders are still there, noted Barnum.

Even the former late delayers in the banking sector show signs of resurgence.

Wells Fargo CEO Charlie SCHARF, finally withdrew the yoke from a punishment from the Federal Reserve which capped the report of its bank at the 2017 levels, seemed to be in a call for results this week. His business recently gave all of its employees a bonus of $ 2,000 to celebrate the milestone.

“It’s an incredibly interesting and fun moment,” SCHARF told analysts on Tuesday. “We are starting to see the deposit flows, as we have talked about. We have new account growth. We have expenses in check. Credit works well … We have fewer constraints.”

The actions of another former Laggard, Citigrouphave climbed almost 30% this year while CEO Jane Fraser convinces investors that his recovery plan works.

Fraser this week looked like a CEO of the attack, revealing the new luxury credit card of the bank and plans to issue a Citi brand stablecoin. It has also been amazed by the resilience of the American economy.

“The strength of the American economy, driven by the American entrepreneur and a healthy consumer, has certainly gone out of expectations,” said analysts. “While I was talking to the CEOs, I was again impressed by the adaptability of our private sector.”