The management at JPMorgan Chase, currently the largest bank in the United States in terms of total assets, holds valuable insights into the economic pulse of the nation. The bank’s latest earnings conference call for the first quarter of 2024, held two weeks ago, provided useful insights into the health of American consumers and businesses. In summary: while economic indicators in the United States continue to look positive and consumers are in good shape, there are numerous risks on the horizon. As a result, JPMorgan Chase’s management is preparing for a range of outcomes.

Below are excerpts from the conference call, showcasing insights from the management team:

1. Management perceives that while U.S. economic indicators remain positive, there are several risks (including geopolitical conflicts, inflationary pressures, and Federal Reserve quantitative tightening), thus they are preparing for a range of outcomes; the economy appears healthy at a turning point; management believes that even if problems arise elsewhere, the U.S. economy would still be affected.

Many economic indicators continue to trend positively. However, looking ahead, we remain vigilant about several significant uncertainties. Firstly, global conditions are concerning—frightening wars and violence continue to inflict suffering, and geopolitical tensions are escalating. Secondly, there seems to be sustained inflationary pressure, which is likely to persist. Lastly, we have never truly experienced the full impact of such scale of quantitative tightening. We do not know how these factors will play out, but we must prepare the company for various potential environments to ensure that we can consistently serve our customers…

…But I caution people, these are all the same outcomes of massive fiscal spending, massive quantitative easing, and so forth (referenced in the positive comments about consumer and business conditions in points 2 and 6 below). So, we really don’t know what’s going to happen. I also want to see what this year brings, see what two or three years bring, all the geopolitical impacts and oil and gas, and how much fiscal spending actually happens, our elections, etc. So, our situation is good—we’re okay for now. That doesn’t mean we’re going to be okay all the way through. If you look at any inflection point, what’s happening now always looks normal. That’s true in 72 years, that’s true at any point in time you’ve lived through. So, I just hold a more cautious view, and people’s sentiments, confidence levels, etc., might not necessarily prevent you from hitting an inflection point. So, things are good today, but you have to prepare for a range of outcomes, and we’re doing that…

…I think one thing to point out when we talk about the impact of geopolitical uncertainty on prospects is that the U.S. is not isolated, right? If we encounter macroeconomic issues due to geopolitical situations, then it’s not just a problem outside of the U.S., it will also affect the global economy, which in turn affects the U.S., and then affects our corporate clients, and so forth.

2. Management believes consumers remain healthy, with overall spending remaining flat compared to a year ago, although their cash cushions have normalized but still remain above pre-pandemic levels; even in the event of an economic downturn, consumer conditions would remain fairly good; the labor market remains healthy, with wages keeping pace with inflation.

Supported by a resilient labor market, consumers’ financial conditions remain robust. While cash cushions have largely normalized, balances still exceed pre-pandemic levels, and wages are keeping pace with inflation. When observing stable customer cohorts, overall spending is consistent with the previous year…

…I would say consumer customers are doing well. Unemployment rates are extremely low. Home prices are down, stock prices are down. Their incomes required to service debt are still very low. But the extra funds for lower-income people are running out—not running out, but normalizing. You will see credit normalize slightly. Of course, higher-income individuals still have more money. They are still spending. So, whatever happens, customers’ conditions are good. If there’s an economic downturn, their conditions would be fairly good.

3. Auto initiation volumes declined

In the auto space, initiation volumes were $8.9 billion, down 3%, but we maintained healthy profit margins and market share.

4. Net charge-offs (bad loans that JPMorgan Chase cannot recover) increased from a year ago by $1.1 billion, primarily due to credit losses associated with credit cards returning to historical normal levels; management expects strong growth in credit card/debit card consumer spending in 2024

As far as credit performance for the quarter, credit costs were $1.9 billion, primarily driven by net charge-offs, up $825 million from the prior year primarily due to ongoing normalization in credit card operations…

…Of course, in Card, while charge-offs are now close to normalization, fundamentally, we have been experiencing a long period of charge-offs, which measured historically very low, although measured historically low NIIs as well…

…Yes, we still expect card loan growth of 12% for the year.

5. Management is uncertain about the level of interest in capital market activities

While we are encouraged by the level of capital market activity this quarter, we need to note that a significant portion of it may start later this year. Similarly, while the announced M&A activity this quarter showed some positive momentum, whether this momentum will continue remains to be seen, and the advisory business still faces structural headwinds from regulatory environments…

…I’ll start with IPO. So we’re a little cautious there. There have been some disappointing performances in some IPO batches and years. I think this quarter that narrative has changed meaningfully. So, I think we’re seeing better IPO performances. Obviously, the market has borne some pressure over the past few days. But overall, we’ve got a lot of support there, which is always helpful. The dialogue is quite good. We’ve had many interesting different types of conversations with global companies, multinational companies, split-off companies. So, the dialogue is good. The valuation environment is better, so there are some reasons to be optimistic. Certainly, there’s always pipeline dynamics for ECM (equity capital markets), and the situation has been particularly good this quarter. So, we’re cautiously optimistic going forward, I think, and I think in DCM (debt capital markets), it’s more serious, because the proportion of refinancing in the total debt is quite high. The first quarter has already been completed. So, that’s a factor.

I think the M&A question may be the most important one, not just because of its impact on M&A, but because it has a ripple effect on DCM through acquisition financing, etc. There are well-known regulatory resistances there, which will certainly create some cicada effects. I don’t know. I’ve heard some talk about some pent-up deal demand. Who knows how important politics are in all this. So I don’t know.

6. Management believes businesses are in good shape

Business conditions are good. If you look at it today, their confidence is increasing, orders are decreasing, and profits are increasing.

7. Management believes universally accepted economic scenarios are almost always wrong, and no one can accurately predict economic inflection points

Another thing I want to point out is, because all these issues about rates, yield curves, NII, and credit losses that you’re predicting today is based on—not on our thoughts in economic