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JPMorgan's third quarter results reported both a bang and a moan. The fantasy sounded louder in the ears of investors.
The bang: JPMorgan's revenues grew by 5.2% to $ 27.8 billion, exceeding analysts' expectations by $ 380 million. Earnings were $ 2.34 per share, again exceeding expectations of 8 cents. For a few glorious moments, investors have welcomed the possibility that banks' profits are selling better than last week's sales. JPMorgan shares rose 2.5%.
Then came the groan. Once the investors had a few minutes to assimilate the letter to the leaders of Jamie Dimon, who accompanied the report on the results, they began to sell.
In his letter, Dimon lavishly praised the strengths of the US economy: job growth, rising wages, investment spending, and so on. with China. The S & P 500 lost 7% of its value in the six days before the publication of JPMorgan's results, although it rose 1.4% on Friday.
"The evolution of expectations, whether around inflation, growth or recession (yes, there will be another recession – we do not know when"), the offer and demand, sentiment and other factors can cause considerable volatility, "wrote Dimon." Whereas in the past, interest rates were low and lasted longer than expected, but they could go more high and faster than expected. "
If this is not what the investors hoped to be reassured, he also had disturbing ideas on the trade, after checking the name of President Trump.
"We have entered a period of uncertainty regarding world trade. President Trump … has begun demanding major changes in our trade agreements with many countries, "Dimon writes in his letter. "It is always possible that miscalculations on the part of the various actors lead to negative results. This obviously creates a higher risk and more uncertainty until it is resolved. "
Dimon closed his thoughts on American politics with words that sounded like a warning: "It is an absolute necessity that America maintain a world-class economy, with world-class companies and a world-class army. We need to better manage our economy if we want it to be world class. "
During a teleconference with investors, Mike Mayo, an analyst at Wells Fargo Securities, asked Dimon to expand his comments. "Your letter from CEO highlights the hope that interest rates would rise much higher," Mayo said. "But, it does not seem like the market is digesting it as well as you might think it would digest it."
"I noticed that the market might not support it as well if rates went up and, because it will surprise people a bit, people should not be surprised," said Dimon. "So I also pointed out that people should be prepared for that, pretty much on the probability that rates could go higher. They should not be surprised. So, I'm always surprised when people are surprised. "
Later, during a phone call with journalists, Dimon found himself defending the surprise he had created for investors. "I was pointing out the odds I thought were higher than the rates would go up. I still believe it. I think you will see higher rates, "he said. "It's a long list of things … I'm just pointing it out. No one should be surprised if this happens later. "
JPMorgan shares sold the gain of 2.5% and closed down 1.6%.
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