Apr 18, 2026
Despite — or maybe because of — volatile markets and increasing consumer costs, recent quarterly earnings reports from big banks show the banks are doing well (1). But JPMorgan Chase [NYSE:JPM], at least, is still preparing for a possible recession.
During JPMorgan's 1Q26 quarterly earnings call, chairman and CEO Jamie Dimon declined to predict whether the U.S. was heading for a recession (2). But he did say that, whenever the next credit cycle hits, he thinks "it'll be worse than people expect."
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Here's why JPMorgan is preparing, along with other takeaways from the big banks' 1Q26 earnings reports.
Volatile markets are good for big bank trading
Many of the big banks are reporting high profits this quarter. Citigroup's net income, for example, is up 42% (3), while Morgan Stanley's net income is up more than $1 billion, from $4.3 billion in 1Q25 to $5.6 billion in 1Q26 (4).
One factor that can explain why profits are up is the same market volatility that's causing gas and grocery prices to skyrocket, as banks can make money from market volatility through trading. The combined trading revenue of JPMorgan, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley and Bank of America was around $45 billion for 1Q26, according to the Wall Street Journal (1).
Comparatively, their combined trading revenue was just over $30 billion last quarter (4Q25), and under $40 billion in 1Q25.
Trading wasn't the only area where banks saw revenue increases, as many of the banks saw double-digit growth from wealth management. Goldman Sachs credited their 12% increased global wealth and investment management revenue (5) to "higher asset management fees, up 15% to $4.2 billion, reflecting higher market valuations and strong assets under management flows."
This essentially means the bank is managing more high-quality assets than it was before.
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JPMorgan is preparing for the next recession to be worse than average
One of the topics that Dimon discussed is a credit cycle, which is the idea that credit goes through expansion and contraction cycles (6).
During expansion, more people are taking out loans or other forms of credit, and those loans are good quality — people are less likely to be delinquent with their payments. During contraction, fewer people are taking loans and more people are falling behind.
Contractions in a credit cycle are often (but not always) tied to recessions. They're also worse for the banks' bottom lines. Dimon, however, doesn't explicitly say that he thinks a recession is coming in the quarterly earnings call.
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"I'm not forecasting anything," Dimon said (2). "I'm simply saying, for JP Morgan, we have to be prepared for a recession, and that you could have stagflation. Obviously, if you have stagflation and higher rates for longer and credit spreads gap out, that will put a lot of stress and strain on leveraged companies as they refinance."
In a recent chairman letter (7), Dimon says he thinks the next credit cycle will be worse because credit standards have been weakening "across the board." He also says that private credit isn't very transparent, which means people will sell based on predictions rather than actual losses.
How you can prepare your wallet for a potential recession
Dimon says it's hard to predict which industry will be hit the hardest by a recession. This means that predicting whether a specific company or set of companies in your portfolio will tank, leaving a significant hole in your investments, is rather difficult.
The best way to prepare for the unpredictable is through diversifying your investment portfolio. That way, your bottom line will stay relatively stable even if an industry you're invested in takes a big hit.
More and more companies are conducting large layoffs (8), and a possible recession could make it even harder to find your next job if you're impacted. The common advice is to save three-to-six months of expenses in your emergency fund, but it might be a good idea to save even more if you're worried about high unemployment rates.
This is especially true if you work in an industry that's currently seeing a lot of layoffs, such as software engineering.
Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
The Wall Street Journal (1),(8); JPMorgan Chase (2),(7); Citigroup (3); Morgan Stanley (4); Bank of America (5); Federal Deposit Insurance Corporation (6).
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Kit Pulliam is a DC-based financial journalist with over five years of experience writing, editing, and fact-checking financial content. They've covered a wide variety of financial topics, including banking, taxes, budgeting, investing, politics, the economy, and government policy.
