Since the financial crisis of 2008, the United States has seen a slow and steady increase in its overall economy. Low unemployment rates, steady increases in gross domestic product (GDP) and steady inflation have all amounted to a good couple years for the United States financially. Recently, news has sprouted about the potential for a U.S. recession in the coming years, causing a lot of noise in the economic world.

With a “peaking” attitude rumored throughout the country, both banks and the Federal Reserve have made changes accordingly to combat the growth. Jerome Powell and the Fed just recently raised interest rates for the fourth time since 2018. With rates at 2.5%, banks have been doing pretty well in the last couple years, but that may change soon.

Currently, J.P. Morgan Chase and Bank of America hold the top spots among U.S. banks, holding over five trillion in assets combined. Their presence in the financial industry is staggering, and their profits are as well. As of April 12th, J.P. Morgan Chase released earnings of 9.3 billion dollars and 7.3 billion dollars for Bank of America, an increase from expectation of over 20%. Keep in mind, this is all in the first quarter. These numbers are definitely mind blowing, but why is no one celebrating?

When seeing profits like this, most expect the culprit to be the high interest rates that we are currently experiencing. The blame goes to the Fed for making us pay top-dollar for loans, but that may change in the coming months, especially with the Fed indicating it will hold off raising interest rates amid slow economic growth. Interest rates are expected to lower in order to balance out spending. This is causing all of the top banks to make statements to their stockholders predicting the darkest fear of the industry: decreases in profit in the next few years. This doesn’t necessarily mean the banks aren’t doing well, but instead it shows the fragile nature of stockholders’ need to see profits.

Stocks of the big 5 (J.P. Morgan, Citigroup, Wells Fargo, Goldman, Bank of America) have all seen declines since the announcements, and many predictions say that this may be the start to something much bigger. “I think the second quarter will be the peak earnings point for the year, and probably the whole cycle,” states analyst Charlie Peabody.

This is not as big of a dark cloud as some may see it being. Personally, I think every economic expectation in recent years has been overestimated enough to where the actual effect doesn’t even make stockholders blink. With a healthy economy, it is hard for me to say that this should be worrying to most. However, it is easy to say that the stock market has grown very fragile. Banks will be tested in the coming years on whether they’ll be able to continue their profitable quarters; most to come from deposits and loans. This also can be seen as an opportunity for banks to buy back stock. Cutting expenses and improving the bottom line will be an important aspect of “thinning” and forcing banks to assure their assets are in check with a wide amount of diversification.