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Big Banks Raising Giant Red Flag For US Economy

Some of the country’s largest banks are expected to see a 15% decline in profits in the fourth quarter compared to the year before, signaling a possible recession, according to The Wall Street Journal’s analysis of data from FactSet, an independent financial data company.

JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley will report their fourth quarter results in the coming days, which are expected to demonstrate a total of about $28 billion in profits, 15% lower than the fourth quarter a year prior, according to the WSJ. Banks have set money aside over the past year in anticipation of a slowing economy, which can cut banks’ profits.

Bank profits can serve as a bellwether for the broader economy; the factors contributing to declining bank profits, such as high interest rates, can also contribute to a possible recession by slowing housing and labor markets.

Bank revenues will likely rise from the year prior due to rising interest rates, but rate hikes drive up banks’ interest costs and cut into profits, according to the WSJ. Rising interest rates have also driven up mortgage costs and cut into the revenue banks typically earn through home loans, all while cooling off the housing market.

Banks are also taking massive unrealized losses in the volatile securities market, according to the WSJ.

This is the latest of a series of red flags indicating a possible economic downturn may be around the corner. U.S. government pension funds have the lowest cash holdings since the 2008 financial crisis, and corporate pensions’ cash holdings are barely above the 13-year low they hit in 2021; pension funds could be forced to sell off assets at low prices to continue payments, resulting in a massive loss in value.

While American consumers are still spending above pre-pandemic levels and credit and debit card spending is still rising, the coming year will likely present new challenges due to volatility in financial markets, Bank of America warned, according to the WSJ.

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One Comment

  1. Of course we’ll have a recession and worse, no matter how much they continue to try and change the definition of a recession. It’s the government’s never ending money printing that is driving inflation and there’s no end in sight. That and Biden’s promise to end “fossil fuel” in America.
    First, there’s the Democrats laughably called 740 billion dollar “Inflation Reduction Act” which is actually nothing but a “Green New Deal” slush fund with items such as 60 billion dollars for “environmental justice”. Then there’s (supported by McConnell and 12 other RINO’s) the just passed nearly 2 Trillion dollar Omnibus Spending Bill that increases funding for our now “woke” Military with no accountability for their disastrous withdrawal from Afghanistan. Of course, zero dollars for our completely open border that lets in millions that will have to be supported by taxpayers. More unaccountable and never ending (100 billion so far) dollars to the corrupt Ukrainian regime for our proxy war against Russia that we didn’t want, didn’t vote on, and can’t win.

    The Feds have to continue to increase interest rates because it’s the only remedy for the out of control inflation. As interest and mortgage rates continue to rise, the housing market will collapse; along with all the supporting industries such as building materials and supplies, construction jobs, lumber, manufacturing household goods and appliances, etc., etc.. The marginal improvements in employment we now have will disappear and American’s debt and bankruptcies (already at historic levels) will skyrocket.

    Then perhaps, if it’s not too late, by 2024 impoverished Americans will be ready to vote these destructive progressive ideologues out of office.

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