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After two years of uncertainty and lockdowns that resulted in the largest drop in global GDP history, the 2022 outlook is looking brighter. As pandemic volatility continues to fade, J.P. Morgan Global Research forecasts are upbeat, with expectations of further equity market upside and above-potential growth. Earnings growth also looks better than expected, supply shocks are easing, the China and Emerging Market (EM) backdrop is set to improve and consumer spending habits should continue to normalize.

"Our view is that 2022 will be the year of a full global recovery, an end of the global pandemic and a return to normal conditions we had prior to the COVID-19 outbreak. We believe this will produce a strong cyclical recovery, a return of global mobility and strong growth in consumer and corporate spending, within the backdrop of still-easy monetary policy. For this reason, we remain positive on equities, commodities and emerging markets and negative on bonds."

Hussein Malik

Chief Global Markets Strategist, Global Co-Heads of Research

Global growth

As 2021 draws to a close, the post-pandemic global rebound is facing its first genuine resiliency test. Supply-side pressures have intensified as supply chain issues and persistent bottlenecks have led to pent-up demand and excess savings. Despite this stiff test, J.P. Morgan Research continues to see global growth accelerating in the final quarter of this year, as it displays the strong underlying fundamentals that will sustain above-potential growth for 2022. 

“When the smoke created by pandemic volatility clears, forces promoting a global reflationary tilt will come into focus as healthy private sector fundamentals and growth-oriented policy stances interact with a global economy operating with limited slack.”

Bruce Kasman

Chief Global Economist, J.P. Morgan

As pandemic-induced uncertainty eases, private sector fundamentals should sustain above potential-growth. Households and corporates have built up excess savings, and credit conditions are easing. At the same time, there is considerable pent-up demand in global services and inventories. The positive interaction of these healthy fundamentals and growth-oriented policies is a recipe for a global reflationary tilt. Governments are moving slowly to unwind pandemic supports and J.P. Morgan Research estimates a modest 0.5 percentage point of GDP fiscal drag next year. While monetary policy is expected to stay fairly accommodative as well, with global policy rates expected to end next year only 68 basis points (bp) above their pandemic levels, with this increase concentrated in Emerging Markets (EM). 

While European growth sags, Asia is anticipated to see a bounce as mobility has increased significantly along with vaccination rates. In addition to highlighting the still-substantial global growth impulse from service-sector normalization, global manufacturing should benefit as Asian supply constraints ease. Additional fiscal stimulus is expected to come from Japan that shows Developed Market (DM) policy reaction functions remain growth biased.

The time it will take for the economy to recover from the pandemic is expected to be shorter than that from the global financial crisis and the prior three expansions. 

The chart shows the length of time taken for recovery from the global financial crisis, alongside the average of the prior three expansions. Recovery time from the coronavirus pandemic is predicted to be shorter.

Passing this resiliency test will confirm that growth-supportive dynamics have room to run, but tension is brewing in an otherwise upbeat outlook, as the expansion moves forward with relatively weak supply-side dynamics. In the U.S., J.P. Morgan Research forecasts now project the unemployment rate will fall below 4% before the middle of 2022. Overall, the DM output gap is anticipated to close before the end of 2022. By contrast, J.P. Morgan estimates show it took eight years of expansion to close output gaps following the global financial crisis.

(% change annualized)

Looking to 2022, J.P. Morgan Research expects to see market upside, though more moderate, on better-than-expected earnings growth with supply shocks easing, China/EM backdrop improving and normalizing consumer spending habits.

Central bank policy is set to remain broadly accommodative despite Federal Reserve (Fed) tapering, with an additional $1.1 trillion in global DM central bank balance sheet expansion through the end of 2022 and a more dovish Fed relative to current market expectations ahead of U.S. midterm elections. While inflation will remain a recurring theme, there is a compelling case to be made for inflation rotation rather than broad-based acceleration in prices. Record corporate liquidity and strong fundamentals should continue to drive capital investment, inventory re-stocking, shareholder return and merger and acquisition (M&A) activity. 

"Next year, we expect S&P 500 to reach 5050 on continued robust earnings growth as labor market recovery continues, consumers remain flush with cash, supply chain issues ease, and inventory cycle accelerates off historic lows."

Dubravko Lakos-Bujas

Chief Global Equity Strategist, J.P. Morgan

While there have been sporadic setbacks with COVID-19 variants, this needs to be seen in the context of higher natural and vaccine-acquired immunity, significantly lower mortality and new antiviral treatments. With this in mind, the key risk to this outlook is a hawkish shift in central bank policy - especially if post-pandemic dislocations persist, such as further delay in China reopening or continued supply chain issues.

 The S&P 500 reached the J.P. Morgan Research price target of 4,700 (+25% year-to-date, +38% since February 2020 high) on the back of rapid earnings growth driven by rising mobility and generous monetary and fiscal policy. 

“Next year, we expect S&P 500 to reach 5050 on continued robust earnings growth as labor market recovery continues, consumers remain flush with cash, supply chain issues ease, and inventory cycle accelerates off historic lows. Most of the equity upside should be realized between now and the first half of 2022. More so, equities have already priced in a more aggressive Fed, while high beta stocks (both high beta growth and value) have significantly de-rated, lowering the bar for equities to outperform” said Dubravko Lakos-Bujas, Chief U.S. Equity Strategist at J.P. Morgan Research.

S&P 500 2022 price target: 5050

Outside of the U.S., European equities have performed strongly this year, up 21% for MSCI Europe, and J.P. Morgan Research forecasts remain bullish on the equity market’s direction into 2022, as central bank policy remains accommodative and another year of expected positive earnings is seen. Japanese stocks are expected to also have moderate upside in 2022 and J.P. Morgan estimates EM equities will return 18% in 2022.

Commodities

Despite a late-November setback, commodities are set for a strong year ahead. While energy stands out as the major outperformer, tight balances across industrial metals and agriculture have also propelled those sectors higher,  as supply this year has struggled to keep pace with resurgent demand.

“Commodities are on pace to deliver the strongest year of returns since the early 2000s. A constructive economic outlook, depleted inventory levels and supply still struggling to respond to resurgent demand point to a second consecutive year of positive double-digit commodity returns in 2022,” said Natasha Kaneva, Head of the Global Commodities Strategy at J.P. Morgan.

 Looking at the year ahead, the global economic expansion is still in the midst of its first genuine resiliency test, made even more challenging by the emerging, heavily mutated Omicron variant. Barring a material backslide on the COVID-19 front, J.P. Morgan Research economists see strong underlying fundamentals sustaining above-potential global GDP growth in both 2022 and 2023 with pro-growth fiscal policies continuing to support the ongoing recovery. This is the backdrop for three major commodities themes in 2022: 

“Looking across the sector, we believe that oil is set to remain a major beneficiary of a continued economic reopening over the course of 2022. The last time consumption was as high as we forecast next year, U.S. shale drillers were pumping flat out and the Organization of the Petroleum Exporting Countries (OPEC) and its allies were locked in a battle for market share,” said Kaneva. 

Brent crude prices are predicted to average $88 bbl in 2022 and breach $90 bbl somewhere in Q3 2022. From an average of $1,765/oz in Q1, gold prices are set to steadily decline over the course of next year to a Q4 average of $1,520/oz.

The fundamental outlook also remains constructive across the agricultural complex, as world and major exporter balances show a sustained tightness in inventories through 2021/22 and 2022/23, on low carry-in stocks and strong demand. Industrial metals will still take time to find balance next year, keeping prices supportive over the first half of 2022, however, with relatively middling Chinese demand growth expected, prices could come under more sustained pressure later in the year. An unwinding in ultra-accommodative central bank policy will be most outright bearish for gold and silver over the course of 2022.

Rates and currencies

In 2022, strong growth momentum is expected to continue with persistent but still declining inflation pressure triggering a different response across central banks. Further vaccine rollout and booster deployment will help break the link between the virus and mobility restrictions, with only a gradual adjustment on the monetary policy side and a key focus in DMs on labour markets and wage pressures.

 The Federal Open Market Committee (FOMC) has started to lay out the path from removal of accommodation and announced the tapering of the asset purchase taper in November. J.P. Morgan forecasts the Fed to finish tapering by mid-2022 and to start hiking 25bp quarterly in September 2022.

J.P. Morgan Research expects Treasury yields to rise in 2022, with the intermediate sector (bonds with a maturity of 2-10 years) leading the way. With the Fed projected to lift-off in September, but markets pricing a July hike, project 2-year yields rising modestly to 0.7% in Q2 before making a larger move to 1.20% by year end. Meanwhile, given the resilient economic environment, the curve has room to steepen for a short period in early 2022 and 10-year yields are projected to rise to 2% by mid-year and 2.25% by the end of 2022. Finally, long-end yields are expected to rise as well, but only barely retracing to the highs observed earlier this year by late-2022.

"With the economy expected to grow firmly above trend in 2022, inflation expectations are expected to remain well anchored and as the Fed is being patient in raising rates, compared to prior tightening cycles, Treasuries appear mispriced at current yield levels." 

Co-Head of U.S. Rates Strategy, J.P. Morgan

The Bank of England (BoE) should continue their hikes after an expected 15bp hike in December. The European Central Bank (ECB) will likely deliver purchases beyond its pandemic emergency purchase programme (PEPP) at the December meeting, implicitly pushing back any rate lift-off in 2022 via their commitment to sequencing.

“With the economy expected to grow firmly above trend in 2022, inflation expectations are expected to remain well anchored and as the Fed is being patient in raising rates, compared to prior tightening cycles, Treasuries appear mispriced at current yield levels. We expect 10-year yields to rise to 2% by mid-2022 and 2.25% by the end of 2022,” said Jay Barry, Head of USD and Bond Strategy at J.P. Morgan Research.

 J.P. Morgan Research is forecasting 1.6% gains in the USD index in 2022. While the euro, Japanese yen, Chinese yuan renminbi and Mexican peso are expected to underperform with G10 commodity currencies likely to outperform. 

Emerging markets

2022 will be an uphill struggle for EM asset returns as growth moderates and the Fed starts hiking. The global expansion is set to continue into 2022 at an above trend pace, including for EM economies, but EM and global growth will moderate from the early cycle dynamics of 2021. 

"We continue to expect EM opening up and mobility to rise as vaccination rolls out, but the pace will differ based on individual COVID-19 tolerance policies."

Luis Oganes

Head of Currencies, Emerging Markets and Commodities, J.P. Morgan

EM GDP growth will slow to 4.7% next year from 7% in 2021, but will remain above its 2015-19 trend. The main drags will come from moderating DM growth and changes in the drivers of the Chinese economy, the withdrawal of domestic fiscal and monetary policy supports, albeit at a slower pace than in 2021 and lower terms-of-trade trade gains.

“We continue to expect EM opening up and mobility to rise as vaccination rolls out, but the pace will differ based on individual COVID-19 tolerance policies. Although China’s growth momentum is expected to pick up in the first half of 2022 as the impact of policy supports in the second half of this year kick in, for the year as a whole GDP growth will slow from a 8.1% pace this year to 4.9% in 2022,” said Luis Oganes, Head of Emerging Markets, Currencies and Commodities Research.

With the Fed likely to start hiking next year, there is a large hill to climb for EM currencies and J.P. Morgan Research continues its underweight (UW) stance there. EM rates have already seen a sizable move higher this year, but EM local bonds remain market weight. For sovereigns and corporates, the mid-cycle environment is not as disruptive even with Fed tightening and given spread underperformance this year, J.P. Morgan Research remains overweight (OW) into 2022 seeing some spread tightening in the near-term.

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What’s in an Equity Research Report?

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Even though you can easily find real equity research reports via the magical tool known as “Google,” we’ve continued to get questions on this topic.

Whenever I see the same question over and over again, you know what I do: I bash my head in repeatedly and contemplate jumping off a building…

…and then I write an article to answer the question.

To understand an equity research report, you must understand what goes into a  stock pitch first.

The idea is similar, but an ER report is a “watered-down” version of a stock pitch.

But banks have some very solid reasons for publishing equity research reports:

Why Do Equity Research Reports Matter?

You might remember from previous articles that equity research teams do not spend that much time writing these reports .

Most of their time is spent speaking with management teams and institutional investors and sharing their views on sectors and companies.

However, equity research reports are still important because:

• You do still spend some time doing the required modeling work (~15%) and writing the reports (~20%).
• You might have to write a research report as part of the interview process.

For example, if you apply to an equity research role or an equity research internship , especially in an off-cycle process, you might be asked to draft a short report on a company.

And then in roles outside of ER, you need to know how to interpret reports quickly and extract the key information.

Equity Research Reports: Myth vs. Reality

If you want to understand equity research reports, you have to understand first why banks publish them: to earn higher commissions from trading activity.

A bank wants to encourage institutional investors to buy more shares of the companies it covers.

Doing so generates more trading volume and higher commissions for the bank.

This is why you rarely, if ever, see “Sell” ratings, and why “Hold” ratings are far less common than “Buy” ratings.

Different Types of Equity Research Reports

One last point before getting into the tutorial: There are many different types of research reports.

“Initiating Coverage” reports tend to be long – 50-100 pages or more – and have tons of industry research and data.

“Sector Reports” on entire industries are also very long. And there are other types, which you can read about here .

In this tutorial, we’re focusing on the “Company Update” or “Company Note”-type reports, which are the most common ones.

The Full Tutorial, Video, and Sample Equity Research Reports

For our full walk-through of equity research reports, please see the video below:

Table of Contents:

• 1:43: Part 1: Stock Pitches vs. Equity Research Reports
• 6:00: Part 2: The 4 Main Differences in Research Reports
• 12:46: Part 3: Sample Reports and the Typical Sections
• 20:53: Recap and Summary

You can get the reports and documents referenced in the video here:

• Equity Research Report – Jazz Pharmaceuticals [JAZZ] – OUTPERFORM [BUY] Recommendation [PDF]
• Equity Research Report – Shawbrook [SHAW] – NEUTRAL [HOLD] Recommendation [PDF]
• Equity Research Reports vs. Stock Pitches – Slides [PDF]

If you want the text version instead, keep reading:

Watered-Down Stock Pitches

You should think of equity research reports as “watered-down stock pitches.”

If you’ve forgotten, a hedge fund or asset management stock pitch ( sample stock pitch here ) has the following components:

• Part 1: Recommendation
• Part 2: Company Background
• Part 3: Investment Thesis
• Part 4: Catalysts
• Part 5: Valuation
• Part 6: Investment Risks and How to Mitigate Them
• Part 7: The Worst-Case Scenario and How to Avoid It

In a stock pitch, you’ll spend most of your time and energy on the Catalysts, Valuation, and Investment Risks because you want to express a VERY different view of the company .

For example, the company’s stock price is $100, but you believe it’s worth only $50 because it’s about to report earnings 80% lower than expectations.

Therefore, you recommend shorting the stock. You also recommend purchasing call options at an exercise price of $125 to limit your losses to 25% if the stock moves in the opposite direction.

In an equity research report, you’ll still express a view of the company that’s different from the consensus, but your view won’t be dramatically different.

You’ll spend more time on the Company Background and Valuation sections, and far less time and space on the Catalysts and Risk Factors. And you won’t even write a Worst-Case Scenario section.

If a company seems overvalued by 50%, a research analyst would probably write a “Hold” recommendation, say that there’s “uncertainty around several customers,” and claim that the company’s current market value is appropriate.

Oh, and by the way, one risk factor is that the company might report lower-than-expected earnings.

The Four Main Differences in Equity Research Reports

The main differences are as follows:

1) There’s More Emphasis on Recent Results and Announcements

For example, how does a recent product announcement, clinical trial result, or earnings report impact the company?

You’ll almost always see recent news and updates on the first page of a research report:

These factors may play a role in hedge fund stock pitches as well, but more so in short recommendations since timing is more important there.

2) Far-Outside-the-Mainstream Views Are Less Common

One comical example of this trend is how all 15 equity research analysts covering Enron rated it a “buy” right before it collapsed :

Sell-side analysts are far less likely to point out that the emperor has no clothes than buy-side analysts.

3) Research Reports Give “Target Prices” Rather Than Target Price Ranges

For example, the company is trading at $50.00 right now, but we expect its price to increase to exactly $75.00 in the next twelve months.

This idea is completely ridiculous because valuation is always about the range of possible outcomes, not a specific outcome.

Despite horrendously low accuracy , this practice continues.

To be fair, many analysts do give target prices in different cases, which is an improvement:

4) The Investment Thesis, Catalysts, and Risk Factors Are “Looser”

These sections tend to be “afterthoughts” in most reports.

For example, the bank might give a few reasons why it expects the company’s share price to rise: the company will capture more market share than expected, it will be able to increase its product prices more rapidly than expected, and a competitor is about to go bankrupt.

However, the sell-side analyst will not tie these factors to specific share-price impacts as a buy-side analyst would.

Similarly, the report might mention catalysts and investment risks, but there won’t be a link to a specific valuation impact from each factor.

So the typical stock pitch logic (“We think there’s a 50% chance of gaining 80% and a 50% chance of losing 20%”) won’t be spelled out explicitly:

Your Sample Equity Research Reports

To illustrate these concepts, I’m sharing two equity research reports from our financial modeling courses :

The first one is from the valuation case study in our Advanced Financial Modeling course , and the second one is from the main case study in our Bank Modeling course .

These are comprehensive examples, backed by industry data and outside research, but if you want a shorter/simpler example you can recreate in a few hours, the Core Financial Modeling course has just that.

In each case, we started by creating traditional HF/AM stock pitches and valuations and then made our views weaker in the research reports.

The Typical Sections of an Equity Research Report

So let’s briefly go through the main sections of these reports, using the two examples above:

Page 1: Update, Rating, Price Target, and Recent Results

The first page of an “Update” report states the bank’s recommendation (Buy, Hold, or Sell, sometimes with slightly different terminology), and gives recent updates on the company.

For example, in both these reports we reference recent earnings results from the companies and expectations for the next fiscal year:

We also give a “target price,” explain where it comes from, and give our estimates for the company’s key financial metrics.

We mention catalysts in both reports, but we don’t link anything to a specific valuation impact.

One problem with providing a specific “target price” is that it must be based on specific multiples and specific assumptions in a DCF or DDM.

So with Jazz, we explain that the $170.00 target is based on 20.7x and 15.3x EV/EBITDA multiples for the comps, and a discount rate of 8.07% and Terminal FCF growth rate of 0.3% in the DCF.

Next: Operations and Financial Summary

Next, you’ll see a section with lots of graphs and charts detailing the company’s financial performance, market share, and important metrics and ratios.

For a pharmaceutical company like Jazz, you might see revenue by product, pricing and # of patients per product per year, and EBITDA margins.

For a commercial bank like Shawbrook, you might see loan growth, interest rates, interest income and net income, and regulatory capital figures such as the Common Equity Tier 1 (CET 1) and Tangible Common Equity (TCE) ratios:

This section of the report explains how the analyst or equity research associate forecast the company’s performance and came up with the numbers used in the valuation.

The valuation section is the one that’s most similar in a research report and a stock pitch.

In both fields, you explain how you arrived at the company’s implied value, which usually involves pasting in a DCF or DDM analysis and comparable companies and transactions.

The methodologies are the same, but the assumptions might differ substantially.

In research, you’re also more likely to point to specific multiples, such as the 75 th percentile EV/EBITDA multiple, and explain why they are the most meaningful ones.

For example, you might argue that since the company’s growth rates and margins exceed the medians of the set, it deserves to be valued at the 75 th percentile multiples rather than the median multiples:

Investment Thesis, Catalysts, and Risks

This section is short, and it is more of an afterthought than anything else.

We do give reasons for why these companies might be mis-priced, but the reasoning isn’t that detailed.

For example, in the Shawbrook report we state that the U.K. mortgage market might slow down and that regulatory changes might reduce the market size and the company’s market share:

Those are legitimate catalysts, but the report doesn’t explain their share-price impact in the same way that a stock pitch would.

Finally, banks present Investment Risks mostly so they can say, “Well, we warned you there were risks and that our recommendation might be wrong.”

By contrast, buy-side analysts present Investment Risks so they can say, “There is a legitimate chance we could lose 50% – let’s hedge against that risk with options or other investments so that our fund does not collapse .”

How These Reports Both Differ from the Corresponding Stock Pitches

The Jazz equity research report corresponds to a “Long” pitch that’s much stronger:

• We estimate its intrinsic value as $180 – $220 / share , up from $170 in the report.
• We estimate the per-share impact of each catalyst: price increases add 15% to the share price, more patients from marketing efforts add 10%, and later-than-expected generics competition adds 15%.
• We also estimate the per-share impact from the risk factors and conclude that in the worst case , the company’s share price might decline from $130 to $75-$80. But in all likelihood, even if we’re wrong, the company is simply valued appropriately at $130.
• And then we explain how to hedge against these risks with put options.

The same differences apply to the Shawbrook research report vs. the stock pitch, but the stock pitch there is a “Short” recommendation where we claim that the company is overvalued by 30-50%.

And that sums up the differences perfectly: A Short recommendation with 30-50% downside in a stock pitch turns into a “Hold” recommendation with roughly equal upside and downside in a sell-side research report.

I’ve been harsh on equity research here, but I don’t want to disparage it too much.

There are many positives: You do get more creativity than in IB, it might be better for hedge fund or asset management exits, and it’s more fun to follow companies than to grind through grunt work on deals.

But no matter how you slice it, most equity research reports are watered-down stock pitches.

So, make sure you understand the “strong stuff” first before you downgrade – even if your long-term goal is equity research.

You might be interested in:

• The Equity Research Analyst Career Path: The Best Escape from a Ph.D. Program, or a Pathway into the Abyss?
• Private Equity Regulation : 2023 Changes and Impact on Finance Careers
• Stock Pitch Guide: How to Pitch a Stock in Interviews and Win Offers

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street . In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews

Read below or Add a comment

15 thoughts on “ What’s in an Equity Research Report? ”

Hi Brian, what softwares are available to publish Research Reports?

We use Word templates. Some large banks have specialized/custom programs, but not sure how common they are.

Is it possible if you can send me a template in word of an equity report? It will help the graduate stock management fund a lot at Umass Boston.

We only have PDF versions for these, but Word should be able to open any PDF reasonably well.

Do you also provide a pre constructed version of an ER in word?

We have editable examples of equity research reports in Word, but we generally only share PDF versions on this site.

Hey Brian Can you please help me with coverage initiated reports on oil companies. I could not find them on the net. I need to them to get equity research experience, after which only I will be able to get into the field. I searched but reports could not be found even for a price. Thanks

We have an example of an oil & gas stock pitch on this site… do a search…

https://mergersandinquisitions.com/oil-gas-stock-pitch/

Beyond that, sorry, we cannot look for reports and then share them with you or we’d be inundated with requests to do that every day.

No worries. Thanks!

Hi! Brian! Do u know how investment bankers design and layout an equity research? the software they use. like MS Word, Adobe Indesign or something…? And how to create and layout one? Thanks

where can I get free equity research report? I am a Chinese student and now study in Australia. Is the Morning Star a good resource for research report?

Get a TD Ameritrade to access free reports there for certain companies.

How do you view the ER industry since the trading commission has been down 50% since 2007. And there are new in coming regulation governing the ER reports have to explicitly priced and funds need to pay for the report explicity rather than as a service comes free with brokerage?

In addition the whole S&T environment is becoming highly automated.

People have been predicting the death of equity research for over a decade, but it’s still here. It may not be around in 100 years, but it will still be around in another 10 years, though it will be smaller and less relevant.

Yes, things are becoming more automated, but the actual job of an equity research analyst or associate hasn’t changed dramatically. A machine can’t speak with investors to assess their sentiment on a company – only humans can do that.

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News & Insights

Top Analyst Reports for Tesla, JPMorgan & Oracle

September 28, 2021 — 01:33 pm EDT

Written by Sheraz Mian for Zacks  ->

Tuesday, September 28, 2021

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Tesla, Inc. ( TSLA ), JPMorgan Chase & Co. ( JPM ), and Oracle Corporation ( ORCL ). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see  all of today’s research reports here >>>

Shares of  Tesla have handily outperformed the Zacks Domestic Automotive industry over the past year (+85.6% vs. +46.8%) on the back of increasing automotive revenues as well as energy generation and storage revenues. 

Rising Model 3/Y delivery has also been aiding the company’s growth. Its Shanghai operations are likely to boost revenues further, capitalizing on China’s huge EV market. Construction of Berlin and Texas gigafactories are well on track, with production expected to commence this year. The company’s high research and development (R&D) as well as selling, general and administrative (SG&A) costs are major concerns though.

(You can  read the full research report on Tesla here >>> )

JPMorgan shares have gained +9% in the last three months against the Zacks Major Regional Banks industry’s gain of +7.2%. The Zacks analyst believes that JPMorgan's robust loan and deposit balances, strategic acquisitions, as well as the initiatives to expand the branch network in new markets will keep supporting its profitability.

Its earnings strength and a solid balance sheet is likely to enhance shareholder value. Despite the economic recovery, pandemic-related woes continue to weigh on the company’s prospects. Near-zero interest rates, fee income growth challenges and mounting costs are some of the other major headwinds that keep might weigh on JPMorgan’s revenue growth in the near term.

(You can  read the full research report on JPMorgan here >>> )

Shares of Oracle have gained +43.5% in the year to date period against the Zacks Computer Software industry’s gain of +29.2%. The Zacks analyst believes that Oracle’s growing cloud business and its latest autonomous database bodes well for the long term.

The company's software-as-a-service (SaaS), infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) products are likely to grow strongly over the next few years as enterprises increasingly transition to the cloud. Sturdy demand for the Oracle Dedicated Region Cloud@Customer is also anticipated to drive the top line. Stiff competition, lawsuits as well as high integration risks are likely to impact Oracle though.

(You can  read the full research report on Oracle here >>> )

Other noteworthy reports we are featuring today include The Coca-Cola Company ( KO ), Amgen Inc. ( AMGN ) and Lam Research Corporation ( LRCX ).

Sheraz Mian

Director of Research

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly  Earnings Trends  and  Earnings Preview  reports. If you want an email notification each time Sheraz publishes a new article, please  click here>>>

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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S&P 500 trackers hit a record 27% of 2023 equity ETF flows

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Wall Street’s blue-chip S&P 500 index captured its highest share of global equity exchange traded fund flows for at least a decade last year, as the rise of the so-called Magnificent Seven reshaped benchmarks worldwide.

ETFs tracking the S&P 500 vacuumed up a record $137bn in net terms last year, according to data from Vanguard, surpassing the previous peak of $119bn in 2021.

This accounted for a record 27 per cent of all global equity ETF flows, compared with just 9 per cent in 2022, 13 per cent in 2021 and 1 per cent in 2020. The prior peak, in data going back to 2012, was 22 per cent of global flows in 2016.

The inflows means America’s global dominance of global equity markets is now approaching the levels seen in the 1950s and 1960s, when the US led the postwar economic recovery and the Nifty Fifty grouping of Wall Street blue-chip stocks reaped the rewards.

“People see a lot more in the news about the Magnificent Seven stocks. People want a piece of that, and all these stocks are in the S&P,” said Bill Coleman, head of US ETF capital markets at Vanguard, referring to the septet of tech or tech-related stocks that have driven US stock markets to record highs.

Global demand for exposure to the S&P 500 index is also a sign of the increasing dominance of Wall Street in general.

The US equity market accounts for an “astonishing” 60.5 per cent of global stock market capitalisation, according to research by Elroy Dimson of the University of Cambridge and Paul Marsh and Mike Staunton of the London Business School.

This is up from just 28.6 per cent in 1989, when Japan briefly overtook the US as the home of the world’s largest stock market, and is the highest figure since 1973.

“This reflects the superior performance of the US economy, the large volume of IPOs and the substantial returns from US stocks,” Dimson, Marsh and Staunton wrote in the UBS Global Investment Returns Yearbook 2024 . “No other market can rival this long-term accomplishment.”

Within the US, Coleman attributed last year’s outsized demand for S&P 500-tracking ETFs to the index’s strong performance.

Aided by the powerful showing of the megacap stocks, the S&P 500 chalked up a gain of 24.2 per cent last year, outshining the 14.4 per cent return of the mid-cap S&P 400 index and the 15.1 per cent of the small-cap Russell 2000.

This outperformance has continued this year as the blue-chip benchmark has hit a series of record highs. US small caps are suffering their worst performance run relative to large companies in more than 20 years.

Coleman saw a positive correlation between flows and the previous month’s index returns, helping funnel money to the strongest performers.

In addition, he said “model portfolios, especially in the ETF space, are becoming more and more important”, to overall flow data.

“We saw more models allocate to the S&P 500 last year,” Coleman said. “They are increasing their equity weighting in expectation of a continued bull market, with the possibility of interest rate cuts.”

A desire to jump on the Magnificent Seven bandwagon might not be perceived as an obvious boon for S&P 500 trackers, though.

The six largest stocks in the index are all M7 members. However, investors could get greater exposure via a Nasdaq 100 ETF, with the M7 accounting for 40 per cent of this index, compared with just 29.1 per cent of the S&P 500. Yet the $258bn Invesco QQQ Trust Series ( QQQ ), by far the largest and most liquid Nasdaq-tracking vehicle, attracted just $7.2bn last year, according to VettaFi data, far less than in 2020 or 2021.

“QQQ is a more concentrated way to get exposure. It’s not weighed down by JPMorgan, Berkshire Hathaway and more value-oriented companies,” Todd Rosenbluth, head of research at VettaFi, said.

Coleman squared the circle by arguing “there is appreciation for the diversification here. You are also getting exposure to another 493 companies [in the S&P 500] that make up more than 70 per cent of the index by weight.”

Flows into S&P 500 ETFs were boosted by a technical factor last year when the $533bn SPDR S&P 500 ETF Trust ( SPY ) pulled in $31bn in two days in December. The bonanza included the highest single-day haul on record for any ETF of $20.8bn on December 18, according to VettaFi’s data, shortly before the expiry of a major futures contract.

“Futures were trading rich relative to what the stocks were,” said Coleman. “A lot of people who would normally roll their futures put [their money] into SPY instead”, with the highly liquid SPDR ETF commonly “used for short-term tactical trading to hedge short-term tactical positioning”.

However, even without these anomalous inflows, the S&P 500’s share of global equity ETF flows last year would still have been the highest since at least 2012.

And while SPY has bled a net $8.7bn so far this year, according to VettaFi, as some temporary inflows have reversed, continued strong demand for the $432bn Vanguard S&P 500 ETF ( VOO ) and the $33bn SPDR Portfolio S&P 500 ETF ( SPLG ) means ETFs tracking S&P’s flagship index still accounted for a historically high 20 per cent of global equity ETF buying in the first two months of 2024, according to Vanguard.

Despite the concentrated nature of ETF flows, Rosenbluth saw strong demand for S&P 500 ETFs as a “highly positive sign” for markets at large.

“The S&P 500 index and ETFs that track it is the entry point into the ETF market for many investors. It’s the most well-known and favoured of the US equity benchmarks,” Rosenbluth said.

“So as ETFs further penetrate the American population and culture these ETFs are likely to be the starting point for many people.”

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Commercial & Investment Bank

When Jamie asked me to lead a new organization 12 years ago, I was thrilled. The firm was combining its traditional Investment Bank with the Treasury & Securities Services division.

The rationale was clear. The merger would create a massive franchise encompassing the industry’s most diverse and comprehensive solutions for the world’s largest and most prominent companies, governments and institutions. From capital raising and M&A advice to payments, trading and custody, the combined franchise would enable us to deliver a full range of products and solutions to clients around the world.

As others retrenched, we believed growth would come from being global and diversified, having scale and providing a complete client offering. So we merged two divisions, identified gaps and invested in global capabilities. To this day, I believe the decisions we made then set us up for the success that we’ve had for the last decade. The proof is in the revenue, returns, rankings and market share that we’ve discussed with you over the years.

This January, we announced the latest evolution of our corporate structure by merging two divisions once again: Commercial Banking (CB) with the Corporate & Investment Bank (CIB).

As we integrate these top-notch franchises, I am delighted to hand the keys of this incredible organization to Jenn Piepszak and Troy Rohrbaugh. They are exceptional leaders in every way, and I know they will continue to work hard each day, leading our employees and serving our clients with heart, integrity and excellence.

I am equally thrilled to spend more of my time in my role as President and Chief Operating Officer, helping Jamie with firmwide, strategic priorities that will provide growth and opportunities for years to come.

My focus will be on driving synergies across our lines of business, accelerating our investments in growth and innovation, and optimizing our resources across the firm. Priorities include harnessing data and modernizing our technology infrastructure so we can apply artificial intelligence (AI) to our businesses. This will help identify efficiencies and areas of opportunity. I also want to make sure we continue to manage and deploy capital in ways that best serve our clients, particularly when they need it most.

In 2023, we made significant strides in key areas:

In March, teams across our Consumer Banking, Private Banking, Commercial Banking and Investment Banking businesses joined forces to deliver the firm’s full support to the venture ecosystem in the aftermath of the regional banking turmoil. We are now exploring new ways to better serve this community, including tapping opportunities in the booming private markets so that we can compete effectively in this rapidly evolving area.

Our payments capabilities also continue to strengthen and advance as we prioritize innovation and resiliency. We are unique in that we can compete with fintechs on customer experience and digital solutions while also offering the stability, expansive network and services of a global bank.

Technology is reshaping the financial services landscape, and we are channeling its transformative power. Among our efforts, we are already using AI to onboard customers faster, combat fraud and serve up more insights to clients.

We are pushing into new markets both at home and internationally. Whether it’s growing our presence in emerging markets, deepening our relationships with multinational corporations, or expanding our U.S. branch network and wealth management business, our strategy is guided by a commitment to clients, communities and long-term value creation.

The leadership positions we have today are the result of hard work and investment over many years. We know also how hard it is to stay ahead of the pack. My promise to you, our shareholders, is that we will not be complacent. We will stay humble and hungry and strive always to be the best, most respected financial firm in the world.

Daniel E. Pinto President and Chief Operating Officer, JPMorgan Chase & Co.

In January 2024, we announced an exciting new chapter in our decade-long growth story.

The decision to bring together the firm’s major wholesale businesses to form the Commercial & Investment Bank continues a journey we have been on for a while as we seek to better support clients from their early stages of growth through to international expansion, acquisitions and beyond.

The new combined business has the scale, business diversity and financial firepower to offer complete solutions across banking, trading, payments and custody to middle market businesses, global companies and governments in more than 100 markets.

We are deeply indebted to Daniel Pinto, who built the Corporate & Investment Bank over the last 12 years with leadership positions across products and regions footnote 1 , footnote 2 . In his time as CEO, the CIB grew revenue from $34 billion in 2011 to $49 billion in 2023 and increased net income by more than 75% during the same period, and its Investment Banking and Markets businesses have been #1 franchises for over a decade footnote 1 , footnote 2 .

It is a privilege to lead this remarkable business, and we are thrilled about the opportunities still to come. But let us first reflect on the key events and highlights of our performance in 2023.

OUR PERFORMANCE IN 2023

In 2023, the CIB generated net income of $14 billion on $49 billion in revenue, mirroring 2022’s solid performance but down from 2021’s record highs. Strong trading results and record years for our deposit-taking businesses cushioned the impact of industrywide weakness in investment banking activity, underscoring the benefits of our diversified business model.

The year included central banks hiking rates at the fastest pace in decades, a second year of war in Ukraine and the outbreak of conflict in the Middle East, the collapse of several U.S. regional banks and recession in parts of Europe. Throughout, J.P. Morgan offered its expertise and balance sheet, helping companies, financial institutions and governments weather the storm.

During the regional bank turmoil and resulting economic stress, the firm helped shore up the financial system and the economy, stepping in with billions of dollars in liquidity to help banks, their clients and investors navigate the crisis. This was complemented by the firm helping to raise $155 billion for financial institutions in 2023.

Worldwide investment banking activity was hit by the uncertain economic outlook and market conditions. Industrywide fees shrank to a 10-year low footnote 1 and dealmaking remained subdued, causing our own investment banking revenue to dip slightly, to $6.2 billion from $6.5 billion in 2022. Even so, the business maintained its #1 ranking in global investment banking fees with a wallet share of 8.8% footnote 1 . We also ranked #1 in debt capital markets, #2 in mergers and acquisitions (M&A), and rose to #1 in equity capital markets footnote 1 .

Our M&A franchise advised on nearly 350 deals totaling more than $700 billion in volume footnote 1 , including some of the year’s largest announced transactions: the $42 billion separation of Johnson & Johnson’s consumer health business, agricultural supplier Viterra’s $17 billion merger with U.S. oilseed and grain processor Bunge, and sandwich chain Subway’s $10 billion sale to Roark Capital, one of the biggest transactions in fast food history.

A decline in M&A dealmaking and the higher interest rate environment led to subdued debt capital markets and a drop in our debt underwriting fees to $2.6 billion in 2023 compared with $2.8 billion in 2022. A standout deal was the $31 billion bond deal for Pfizer to fund its acquisition of cancer drug pioneer Seagen, in which the firm had a lead role.

In 2023, our equity underwriting fees were up 11% compared with 2022, and we gained market share year-over-year footnote 1 . While market uncertainty dented confidence in initial public offerings (IPO), the franchise led two of the year’s biggest offerings, including the $5 billion IPO of British chip designer Arm Holdings and consumer health company Kenvue’s $4 billion debut.

It was another strong year for our Markets business, which generated $28 billion in revenue. Some of the uncertainty that plagued investment banking activity kept trading desks busy as clients hedged and positioned themselves accordingly. Fixed Income Markets revenue was up 1% from 2022, driven by the Securitized Products Group and Credit, mainly offset by normalization in Currencies & Emerging Markets, while Equity Markets revenue dipped after a relatively strong performance in 2022.

Clients also voted J.P. Morgan the #1 global research firm in Institutional Investor’s annual survey for the fourth year in a row. Our analysis of economies and markets, including research on some 5,200 companies across more than 80 countries, is particularly sought after during turbulent times.

CIB Payments reported a record $9.3 billion in revenue in 2023, up from $7.6 billion in 2022, as it benefited from the higher interest rate environment.

Securities Services, our fourth major line of business in the CIB, also had a record year, reporting $4.8 billion in revenue. Sitting adjacent to the industry’s largest Markets business, it provides post-trade services to institutional asset-manager and asset-owner clients, providing safekeeping, settlement and related services for securities in approximately 100 markets around the world. Since the CIB was formed in 2012, the Securities Services business has nearly doubled assets under custody from $17 trillion at the end of 2011 to $32 trillion at the end of 2023 footnote 3 . In recent years, investments in technology have enhanced the scale and resiliency of its platforms, enabling the business to grow revenue and secure major new mandates.

footnote Read footnoted information here

SIZING UP THE OPPORTUNITIES AHEAD

J.P. Morgan has an exceptional blend of strengths that have continued to deliver value over time. The completeness of our products and services, talent, ongoing investments in digital technology and tools, client focus and fortress balance sheet have given the CIB strong share positions across almost all areas footnote 1 footnote , 2 .

We are not complacent about these leadership positions. The competitive landscape for our businesses is intensifying, driven by both traditional banks as well as further growth of nonbank financial institutions. Core to our strategy is looking very closely at all areas of the business and pinpointing where there are weaknesses and opportunities to grow.

Here are some of our target areas:

The benefits of integration

This year we are integrating our major wholesale businesses Commercial Banking and the Corporate & Investment Bank. There are more connections between the two businesses than ever before. In 2023, over $3 billion in gross Investment Banking and Markets revenue footnote 6 and more than $8 billion in firmwide Payments revenue, almost half, came from Commercial Banking clients footnote 7 . With our extensive footprint in the middle market, combined with our Investment Banking franchise, we are uniquely positioned to support middle market clients as they grow in size and complexity.

At the same time, our biggest multinational and asset manager clients are navigating an increasingly complex set of challenges and need a banking partner with the scale, global reach and full-service offering to resolve them. With employees around the world supporting clients in more than 100 countries, the newly enlarged business is among the most complete institutional client franchises in the industry. Wherever companies are on their growth journey, the newly combined business will have the resources and coverage to help.

Trading at scale

Our trading business operates at huge scale.

In 2023, in the U.S. alone, it handled more than 42 billion client orders and helped investors buy and sell nearly $11 trillion in 12,000 equity securities.

Our strategy of being a complete counterparty is paying off, with our biggest institutional clients choosing to do more business with us. Accordingly, the bank’s share of the institutional client wallet has grown from 11.1% in 2018 to 13.9% in 2023 footnote 8 .

Being there for clients in all markets and conditions, however, demands a significant amount of capital. Although this is a headwind, the business continues to provide solid returns, and we remain focused on the disciplined allocation of capital while preparing for updated U.S. capital requirements.

As assets and international trade flows increase, we are modernizing platforms by moving to the cloud and increasing automation to handle greater volumes at lower cost.

To capture market share, institutional trading needs to be easy and intuitive. We are investing to enhance the trading experience for clients across the life cycle of their trades from onboarding to pre-trade services like research, execution, post-trade settlement and data services.

We are investing heavily in the electronification of our credit business, bringing across some of the technology and approach behind our Equities business. Among other initiatives in 2023, J.P. Morgan launched a new algorithmic trading offering to U.S. Treasury investors to capture share in the world’s most important bond market.

Private capital markets

Private markets — both credit and equity — have grown significantly over the past decade. The private credit market has grown nearly fourfold over the last 10 years to more than $1.6 trillion footnote 9 , while money raised in venture capital and private equity growth deals has more than doubled over the same period footnote 10 .

Our borrower and investor clients are on both sides of this growth, and we are well-positioned to serve the full range of their needs. We are growing our solution-agnostic credit strategy, deploying balance sheet where it makes sense for direct lending, in addition to our existing financing and structured solutions. We are also enhancing our offering for asset managers and financial sponsors looking to deploy capital. As the private markets continue to evolve, we will remain a significant player with a goal of providing clients with a full range of financing options.

With the acquisition of First Republic Bank and collapse of Silicon Valley Bank, we have a unique opportunity to expand our support for the Innovation Economy — the ecosystem of venture-backed companies, founders and investors, who rely on the private markets. In the past, these efforts were led largely by Commercial Banking. With our new combined franchise, we can now better serve this dynamic, fast-growing client base. We want to make clients-for-life out of the legions of tech companies and their founders by supporting them from the earliest stages of growth up to IPO and beyond.

Capital for the climate

In 2023, we continued to help clients with their sustainability goals as well as scaling green solutions. Since 2021, the CIB has financed and facilitated $230 billion for green activities toward our firmwide target of $1 trillion by 2030, primarily by supporting clients with green bond underwriting and financing for renewable and clean energy. From financing and capital raising to strategic advice, we are working closely with clients across industries as they aim to meet their own long-term sustainability targets.

Investing for the future

LOOKING AHEAD

The start of 2024 has brought some early encouraging signs for investment banking activity but a more mixed outlook for our Markets business.

Several risks remain. Economies are still adjusting to life after the pandemic and the injection of trillions of dollars in monetary and fiscal stimulus; geopolitical challenges continue to flare; and the competitive threat is intensifying. The outcome of these is inherently unknown — they could provide both headwinds and opportunities for our business.

The consistent returns created by the scale and diversity of our franchise allow us to keep investing through economic cycles. We are global with capabilities at scale, and now combined with Commercial Banking, we have the ability to become even more client-centric.

Our products, services and reach coupled with incredible people and our winning culture make us especially hopeful about the future of our business.

It is an honor for both of us to lead this world-class franchise, and we are excited for the opportunities in front of us.

Jennifer A. Piepszak Co-CEO, Commercial & Investment Bank

Troy L. Rohrbaugh Co-CEO, Commercial & Investment Bank

Commercial Banking

2023 was a dynamic and complex year, marked by geopolitical tensions, stubborn inflation, rapidly rising interest rates and a regional banking crisis. Through it all, Commercial Banking (CB) served as a source of stability for our clients and communities and remained focused on executing our strategic priorities.

Amidst this market disruption, our team rose to the occasion to support thousands of new clients, expand into key markets and accelerate growth across our business. CB’s exceptional performance reflects the strength of our franchise, ongoing client focus, and sustained investments in our platforms and capabilities:

• Record revenue of $15.5 billion , up 35% year-over-year, reflecting higher net interest income, client acquisition and expansion into new markets
• Record net income of $6.1 billion , up 46% year-over-year, and a 20% return on equity
• Record Payments revenue of $8.3 billion , a 45% increase year-over-year
• Gross Investment Banking revenue of $3.4 billion , a 14% increase year-over-year
• Strong credit performance , with net charge-offs of 12 basis points

I’m incredibly proud of our outstanding operational and financial performance. Our team’s steadfast commitment, consistent investments and market discipline drove our success.

Moments that mattered

Given the challenges several key competitors faced in 2023, the banking landscape changed dramatically and greatly accelerated the expansion of our franchise.

Supporting the Innovation Economy : The collapse of Silicon Valley Bank in March of last year was a profound moment. Thousands of founders, companies and investors needed to protect their liquidity and make payroll. Many came to us, and we were ready. Because of our focus and significant investments to serve the Innovation Economy (IE) over the past decade, we were prepared.

In 2023, we accelerated our strategy to support this important segment of our economy by:

• Adding approximately two years’ worth of clients in just two months, with our team working around the clock for weeks to assist clients and open thousands of new accounts
• Expanding our IE presence in eight countries , including Australia, China, Germany, Ireland, Israel, Nordics and the United Kingdom
• Establishing Startup and Climate Tech Banking teams to provide deep sector expertise
• Providing tailored capabilities , such as early-stage venture lending and capital raising
• Investing in platforms that deliver seamless digital experiences and integrated payments offerings specifically designed for startups and high-growth companies

Acquiring First Republic Bank : JPMorgan Chase’s acquisition of First Republic Bank (FRB) was another notable highlight of 2023. Given the overlap with CB, FRB offers a tremendous opportunity to deepen our presence in high-growth markets, expand our client franchise and build upon our team. CB added more than 5,000 Commercial Real Estate clients and approximately 2,000 Middle Market clients along with high-quality loans and deposits. We’re making steady progress on the integration and are excited about the synergies between our businesses and strength of our combined teams.

Executing a proven strategy

Despite these unexpected events, we made tremendous progress executing against our long-term, through-the-cycle strategy.

Building deep, enduring relationships : CB provides local expertise to nearly 70,000 clients across markets and sectors around the world. We welcomed close to 5,000 footnote 6 businesses last year and added roughly 500 bankers to build these relationships. In addition to supporting clients in all 50 states, we established a presence in Israel, Malaysia and Singapore, increasing our coverage of non-U.S. headquartered clients across 27 countries.

Developing powerful solutions : Our firm delivers end-to-end solutions to help our clients run their businesses more efficiently and fuel their growth. Through firmwide partnerships, CB offers customized capabilities, such as bundled services for startups and specialized payments offerings for segments like healthcare, real estate and government. These broad-based global offerings serve our clients through every stage of their life cycle.

Delivering an exceptional experience : CB is making great progress to optimize our clients’ journey across every touchpoint, including faster onboarding times, streamlined documentation and intuitive, self-service tools. As an example, we’ve been able to reduce our onboarding time to under 48 hours for a number of new clients, and we’re working to scale this experience. Informed by our clients’ needs and expectations, we’ll continue to invest in our operations and platforms to offer simple, efficient and digital-first experiences to our clients of all sizes.

Harnessing the power of our data : CB has invested in tools and capabilities to harness the full power of our data. We’ve worked to combine our proprietary data with third-party sources to form an integrated, comprehensive data asset that enables us to better understand our clients’ needs, manage risk and drive operational efficiency.

Empowering our team : One of CB’s key differentiators is – and always has been – our people. We provide our team with specialized training, collaboration and workflow tools, and content targeted to seamlessly address clients' needs. Access to personalized data and analytics helps our team develop deep sector expertise and insights to serve clients in a highly differentiated manner.

Focus on community impact

CB has played an instrumental role in supporting the neighborhoods where we live and work. Our purpose-driven business helps to create an inclusive economy, narrow the racial wealth gap and drive sustainable economic growth. We’re a pivotal part of the firm’s community impact, but our work is more than that—it’s essential to uplifting the places we call home.

In 2023 alone, CB extended more than $18 billion to help communities thrive, including:

• $6 billion to vital institutions, such as hospitals, governments and schools
• $3 billion in loans to emerging middle market businesses
• $5 billion to create and preserve over 41,000 affordable housing units
• $580 million in New Markets Tax Credit financing to support community development projects
• $240 million to community development financial institutions

Our future is bright

By all measures, 2023 was a standout year with our success driven 100% by our people. I’d like to extend my heartfelt gratitude to my extraordinary CB colleagues and partners across the firm whose unwavering commitment not only contributed to our performance but also supported our clients throughout this remarkable year.

My continued confidence in our future reflects our proven strategy, as well as our commitment to being our clients’ most important financial partner. An ambitious agenda awaits, and we’re not standing still. To build upon our strong momentum, we’ll remain disciplined as we accelerate our investments to drive our business forward.

As announced earlier this year, we’re excited to bring together the strengths and capabilities of CB and the Corporate & Investment Bank. This strategic combination further solidifies our strong partnerships across wholesale banking and creates the most global, complete and diversified Commercial & Investment Bank in the world. With an incredible team, extraordinary client franchise, iconic brand and unmatched capabilities, one thing is abundantly clear: Our future is bright.

Douglas B. Petno Co-Head, Global Banking, Former CEO, Commercial Banking

2020 Highlights and Accomplishments

• In 2020, J.P. Morgan raised more than $530 billion in equity and debt for clients around the world.
• J.P. Morgan remained #1 in Markets revenue, and grew wallet share in both Equities and Fixed Income.
• As the #1 merchant acquirer in the U.S., J.P. Morgan processed $43 million in payments per second last year in more than 120 currencies.
• J.P. Morgan is the #2 custodian globally with assets under custody up 41% and assets under administration up 55% over the last 5 years.
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JPMorgan CEO Jamie Dimon compares AI’s potential impact to electricity and the steam engine and says the tech could ‘augment virtually every job’

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said artificial intelligence may be the biggest issue his bank is grappling with, likened its potential impact to that of the steam engine and said the technology could “augment virtually every job.” 

The CEO devoted a chunk of his annual shareholder letter to the importance of AI for the Wall Street giant’s business and for society at large. The bank has identified more than 400 use cases for the technology across marketing, fraud and risk, amassed thousands of AI experts and data scientists and begun exploring deploying generative AI, Dimon said. 

“We are completely convinced the consequences will be extraordinary and possibly as transformational as some of the major technological inventions of the past several hundred years,” Dimon said in the letter. “Think the printing press, the steam engine, electricity, computing and the Internet, among others.” 

Dimon delivered his verdict on AI’s importance in an expansive dispatch that also lambasted a set of regulatory proposals, sounded a stark warning on geopolitics, took aim at shareholder advisory firms and offered a spirited defense of the role of market making in the financial system. And as expected, the 68-year-old weighed in on the economy, reiterating his concern that risks of persistent inflation, quantitative tightening and the ongoing wars in Ukraine and the Middle East loom large even as the US economy remains robust. 

“These markets seem to be pricing in at a 70% to 80% chance of a soft landing — modest growth along with declining inflation and interest rates,” Dimon wrote. “I believe the odds are a lot lower than that.”

Profit Record

Dimon released his letter after JPMorgan notched the highest annual profit in the history of American banking last year. The lender, which reports first-quarter earnings on Friday, benefited from turmoil among regional lenders that began just over a year ago, sending depositors seeking the safety of larger financial institutions. JPMorgan played a major part as those events unfolded, ultimately staging a rescue of First Republic after it failed.

The deal “was not something that we would have done just for ourselves,” Dimon wrote. At the time, JPMorgan said the acquisition would add more than $500 million to earnings annually, acknowledging that was probably conservative. In his letter, Dimon said that figure would likely be “closer to $2 billion.”

The regional banking turmoil unfolded as regulators put the finishing touches on proposals expected to saddle US banks with tougher capital requirements, known as Basel III Endgame. Dimon, an outspoken critic of the proposals, devoted an entire section of his shareholder letter to what he said was the need for a serious review of the bank regulatory and supervisory process. He also reiterated earlier criticisms about the potential for the proposals to cause economic harm.

Market Making

The proposed rules could also damage market making, where banks help investors buy and sell securities, according to the CEO. Dimon dedicated multiple pages defending the role banks play in that business, which he said some regulators seem to view as speculative, hedge-fund like activity.

“This thinking is what might be leading them to constantly increase capital requirements,” he wrote. 

JPMorgan earns about $100 million in daily revenue from the business, which has only lost money on 30 trading days over the last decade, according to Dimon. The proposed rules, which Federal Reserve Chair Jerome Powell signaled last month will be scaled back, could harm market stability, Dimon wrote. 

Proxy Votes

Dimon also used his letter to take aim at proxy advisers — firms which investors like state pension funds and other big asset managers pay for recommendations on how they should vote their stock on contentious topics such as executive compensation.

Dimon has long chided shareholders for casting votes solely based on recommendations from those firms as  lazy and irresponsible . But he went a step further on Monday, calling out the two main US advisers, Institutional Shareholder Services and Glass Lewis & Co., for having what he deemed too much sway determining the outcome of shareholder elections.

“While asset managers and institutional investors have a fiduciary responsibility to make their own decisions, it is increasingly clear that proxy advisors have undue influence,” Dimon wrote. 

Dimon over the years has had to fend off a number of resolutions the two firms backed. He noted Monday that ISS is owed by German firm Deutsche Boerse AG, while Canadian private equity firm Peloton Capital owns Glass Lewis, and questioned if American corporate governance should be determined by for-profit institutions with “their own strong feelings about what constitutes good corporate governance.”

Dimon also said the bank is taking steps to diminish the role of proxy adviser recommendations. By the end of this year, JPMorgan Asset Management will have largely eliminated third-party proxy adviser voting recommendations from its voting systems, he said. The firm will also work with third-party proxy voting advisers to remove their voting recommendations from research reports they provide to the division by the 2025 proxy season.

Other highlights from the letter:

• On the growing private credit industry: “Frequently, the weaknesses of new products, in this case private credit loans, may only be seen and exposed in bad markets, which private credit loans have not yet faced,” Dimon wrote. “When credit spreads gap out, when interest rates go up and when some leveraged companies suffer in the recession, we will find out how those loans survive stress testing.”
• Dimon addressed JPMorgan’s  recent decision  to exit Climate Action 100+, an investor group formed in 2017 to fight climate change. His firm “invested in our own in-house experts and matured our own risk management processes over the years,” he wrote. “As a result, we are going to go our own way and make our own independent decisions.”

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