14.01.26 - US banks open the earnings season

The fourth-quarter earnings season has started with the major US banks, delivering solid headline results. JPMorgan and Bank of New York Mellon reported yesterday, both posting earnings above expectations. Today, Wells Fargo, Bank of America, and Citigroup followed with broadly stronger results, while Goldman Sachs, BlackRock, and Morgan Stanley will report tomorrow.

Markets: US bank stocks declined

My View: Banks often provide the first meaningful signal on both corporate earnings momentum and the underlying state of the economy, giving investors another look at credit quality and consumer health. While reported earnings were mostly stronger than expected, forward guidance matters far more than backward-looking numbers at this stage of the cycle.

Several financial institutions flagged rising risks — including geopolitical tensions, sticky inflation, and elevated asset prices.

US bank stocks had already seen a strong rally in recent weeks, leaving limited upside and increasing the likelihood of consolidation or a shift in momentum. President Trump’s announcement to cap credit card interest rates also weighed on sentiment, raising concerns about potential margin pressure.

I left the financials party earlier. With clouds gathering on the horizon, the risk-reward balance had already turned less attractive. When banks themselves highlight that asset prices are elevated, this should clearly not be ignored.

Looking ahead, technology earnings will be decisive for broader market direction. Taiwan Semiconductor Manufacturing Company (TSMC) is among the first to report tomorrow, with the major US tech names following in the coming weeks.

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