After The Financial Times reported that JPMorgan Chase (JPM) was negotiating to carry out financial transactions for President Donald Trump's administration's Board of Peace, I believe that the bank's financial results could get a significant boost if it lands the role. Still, with the U.S. currently facing multiple significant macroeconomic challenges at this point, the risk-reward ratio of JPM stock does not appear to be very attractive now.
In light of these points, I do not believe that JPM is worth buying now.
About JPM Stock
America's largest bank with domestic assets of $2.75 trillion, JPM is based in New York City. Its CEO, Jamie Dimon, is one of the most prominent people in the U.S. business community. JPM's three main businesses are Consumer & Community Banking, Commercial & Investment Bank, and Asset & Wealth Management.
Last quarter, JPM's net revenue advanced 7% versus the same period a year earlier to $45.8 billion, while its adjusted profits climbed 9% and its earnings per share (EPS), excluding loan loss reserves, came in at $5.23.
Changing hands with a forward price-to-earnings (P/E) ratio of 14.35 times, JPM has a market capitalization of $835 billion.
Landing the Board of Peace Gig Could Positively Move the Needle for JPM
Originally launched to temporarily govern Gaza, the board is now expected to try to help solve other conflicts around the world. About 24 nations have agreed to join the panel, but 47 countries and the European Union were expected to participate in its first meeting.
JPMorgan is expected to process payments involving the panel. But the really meaningful opportunity for the bank will come from derivative opportunities that would arise from its work with the board.
For example, through its work with the panel, JPM could meet the heads of the firms that will carry out Gaza's reconstruction, which is expected to cost about $70 billion. As a consequence of those meetings, JPM is likely to be able to provide lucrative loans to those firms. Similarly, by interfacing with many government officials through the board, JPM will probably obtain major deals with a large number of countries.
Cumulatively, these agreements could significantly increase JPM's top and bottom lines.
The Outlook of the American Economy Is Not Great
After the Supreme Court ruled that many of the tariffs imposed by Trump were unconstitutional, the president imposed new, temporary tariffs, and Treasury Secretary Scott Bessent indicated that new, more permanent duties would eventually be imposed. Since U.S. businesses are unsure about what goods these duties will cover and how high they will be, many U.S. companies will be facing a great deal of uncertainty going forward. And firms facing a great deal of uncertainty tend not to hire many people. Consequently, I expect the U.S. labor market to be relatively weak in the coming months. And the weak labor market, in turn, could cause economic growth to decelerate.
Meanwhile, the personal consumption expenditure (PCE), known as the Federal Reserve's “preferred inflation gauge,” came in at a relatively high 0.4% in December. If inflation continues to be elevated, the central bank may not be able to help the economy by lowering interest rates.
Since banks tend to struggle when the economy is weak, JPM could be in for a rough time this year, even if it becomes the Board of Peace's bank.
On the date of publication, Larry Ramer did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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