JPMorgan Chase (NYSE: JPM) is currently the largest bank in the USA by total assets. Because of this status, it is naturally able to feel the pulse of the country’s economy. The bank’s latest earnings conference call – for the third quarter of 2026 – was held earlier this week and contained useful insights on the state of American consumers and businesses. The bottom-line is this: the US economy continues to experience strong business investment and consumer spending, but there are risks to the global and US economy, including large fiscal deficits, sticky inflation, rising interest rates, and more.
What’s shown between the two horizontal lines below are quotes from JPMorgan’s management team that I picked up from the call.
1. The US economy continued to experience strong business investment and consumer spending in 2026 Q3, but the risks (large fiscal deficits, sticky inflation, high asset prices, rising interest rates, and geopolitical tensions) are shifting; JPMorgan’s debit and credit spend were both up 10% in 2026 Q3, driven by consumer demand; management is not trying to predict higher interest rates, but they think the chance is higher than others think; management thinks if interest rates stay very high for a long time, the consumer will be impacted; the US consumer is currently very healthy because of a strong labour market; management thinks the balance sheets of JPMorgan’s middle-market clients are strong; management sees the corporate credit outlook as stable, even though there are pressures
The U.S. economy continued to be fueled by strong business investment and ongoing consumer spending. However, large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates and geopolitical conditions continue to shift under the surface. These forces may be manageable, but we remain prepared for a wide range of outcomes…
…Debit and credit spend grew 10% year-on-year, with continued momentum across spending categories, including gas and travel, supported by consumer demand…
…[Question] As we assess the risk of interest rates maybe moving even higher than what we saw in the third quarter, maybe your latest thoughts around how you assess the resiliency of the economy to handle maybe a 6% rate on 10-year and just the Fed hiking a few times.
[Answer] Of course things like that could happen. I would never take that off the table. They could happen for good reason, which is a lot of demand for capital, a lot of productivity, and things are fine. They could happen for bad reason, in sticky inflation around the world. They can happen not because of what is in the U.S. It could happen because of what happens overseas. So we are not predicting it. I have always thought there is a higher chance than other people…
…If you keep real rates very, very high for a long time, at some level, that’s designed to slow down economic activity to fight inflation. It’s hard to imagine that that wouldn’t have an impact on the consumer. So far, what we’ve seen in the current data and what’s been true, I would say, for the last few years is that the consumer has been quite resilient in the face of a number of headwinds that under different circumstances you might have expected would present a challenge. But I think the conditional expectation of consumer credit health as a function of higher rates is a fairly nuanced question. But fundamentally, the picture is pretty simple. The consumer is currently very healthy, primarily because of a healthy labor market. But if the central bank needs things to cool off, and that involves an aggressive extended rate cycle, almost by definition, that’s going to involve higher unemployment, which will produce weaker consumer credit results…
…I think there, the theme for some time now has been people worried about other people while doing fine themselves. The theme is always like, we run these surveys and they’re always like, “Oh, I’m worried about this, I’m worried about that.” And it’s like, “How are you doing?” “Oh, I’m doing great.” So it’s kind of an interesting dynamic there. No question that higher rates, I think input costs, inflation, the diesel narrative, these things are tough for middle-market clients. So we see them trying to manage that to the best of their ability, and I think it does create a little bit of caution in that space. But I think balance sheets are strong…
…[Question] Could you talk about the corporate credit health? It looks like you built some reserves on the wholesale side.
[Answer] The wholesale build is actually just from new activity, so it’s not downgrades or change in the outlook or anything like that. I would say that the corporate credit outlook is currently pretty stable. But obviously there are issues out there, and we’ll have to see how those flow through the performance of our borrowers. Energy prices, fuel inputs, higher rates, these are all things that will create challenges in different pockets of the economy and C&I space, as well as the CRE space for that matter. So we’ll see. But so far, it’s very early obviously, but in general, we think corporate balance sheets are in quite good shape, and so there’s been resilience.
2. Net charge-offs for the whole bank (effectively bad loans that JPMorgan can’t recover) was down at US$2.2 billion compared to a year ago (charge-offs was $2.4 billion in 2026 Q2)
Credit costs of $2.7 billion with $2.2 billion of net charge-offs and a $539 million net reserve build.
3. JPMorgan’s investment banking fees were up 14% in 2026 Q3 from a year ago because of strong performance in advisory; management still has a positive outlook, but they’ve seen a slowdown in capital markets activities, which has led to short-term uncertainty; management thinks the capital markets pipeline is fine at the moment, but it can open or close very quickly
IB fees were up 14% year-on-year, reflecting strong performance across products, notably in advisory. While our outlook remains constructive, supported by ongoing client engagement, evolving market conditions have recently slowed activity a bit, so we’ll have to see how the quarter develops…
…The pipeline is fine, but I pointed out many times before, the pipeline is like an accordion. It can open and close pretty quick. You have seen in the U.S., as Jeremy said, the word delayed, probably. We do not really know. We will see. But I was in Europe recently, and the pipeline there is actually quite healthy, and even more so in IPOs than we would have thought. We just do not know…
…We do not obviously know exactly what investment banking fee revenue is going to be in the fourth quarter. I think that we do know that the overall environment is robust and supportive, and there is a lot of business that wants to get done and needs to get done. As you point out, Erika, not surprisingly, given the rate sell-off, you are going to have the market take a little bit of a breath and a pause to make sure buyers and sellers can meet on valuation terms. We did see a little bit of that slowdown in the second half of September, basically. We will see how that plays out into December. I mean, sorry, into the fourth quarter.
4. Management continues to expect credit card net charge-offs for 2026 to be 3.2% (previous expectation was 3.2%; was around 3.3% in 2025)
We continue to expect the card net charge-off rate to be approximately 3.2%.
5. Management feels good about investing long-term in areas that improve the security and resilience of the USA
I want to brag on the Investment Bank a little bit. They have hired a tremendous amount of very talented people in SRI, and we are lucky to have Todd Combs here, investing some of the capital. They have had a lot of ideas. It is not just meetings at this point. They have helped fund some interesting types of things. We have more ideas. They are doing a really great policy around it too, which is what can you do to accelerate security and resilience in the U.S. around, whether it is shipbuilding or —we had a big announcement in Philadelphia. I am proud of them. We have had a bunch of people who retired, who raised their hand, and they are coming back more for patriotism than anything else. It has been just a great effort for the company. As we pointed out, it is global, and the global response has also been exceptional. I have something across my desk which is, alone, over $10 billion or $20 billion of financing in one country. A lot more to come here. I would put in the same category, American Dream Initiative, the innovation economy initiative, the commercial banking initiative around the world. These things are working. We think we are doing the right kind of good business at good returns.
6. Management is going to be stricter with deploying capital for credit because they are seeing credit terms becoming a little loose; the loose credit terms appear to be related to too much AI-related investment activity
[Question] Just following up on the capital allocation. Maybe a comment or two on where you are less comfortable allocating capital to?
[Answer] I am not going to give you very specific stuff, but we are tightening up a little bit on credit. I think some of the credit terms have gotten a little bit loose. You have heard us talk about that before, and other people. A little too much pay, a little too weak covenants, a little too much priming good assets, a little too much pushing on it. We just do not feel you have to chase that kind of stuff anymore…
…To Jamie’s point about tightening up credit, that is a little bit of an overall point about just making sure we are really scrubbing everything. In this moment where AI is such an overwhelming theme, it is producing so much innovation in so many different pockets. There is capital being tapped through all kinds of different mechanisms. We just need to be really, really on top of things to make sure that nothing slips through.
7. Management thinks this latest rate hike cycle is even more unusual than the last one and there isn’t much historical precedent to study
I think it is an important thing for people to be thinking about because this particular rate cycle, this latest rate cycle, is arguably even more unprecedented than the last one. We just don’t have a lot of historical data about how people behave when you see rate hikes from the launch point that we’ve seen this cycle. So it’s been an unusual 10+ years, I would say, and I think it’s quite important for people to realize, especially people who are doing this by training models on historical data, that the historical data set’s just not that rich. So it’s very important to be kind of thinking out of the box.
8. Management thinks no financial institution is immune at this point to a major change in sentiment in the AI space
…I think there, in addition to the obvious single name focus, the other thing to be very careful about is just the AI theme. Because the AI theme is so broadly diffused into the marketplace. It’s not just traditional construction lending. Now, increasingly, it’s working capital revolvers. You also see it in the equity markets. It’s kind of everywhere. So you really need to be running stresses that test your resilience to a meaningful change in the overall theme across the entire enterprise. That’s something that we spend a lot of time thinking about. Currently, our exposures are still quite modest in the context of our overall wholesale exposure, but that’s not the same as saying that we would be immune to a major change in sentiment in the AI space. I think I would be surprised if anyone, frankly, was immune to that at this point.
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