Dimon Sounds the Alarm — Is JPMorgan Bracing for the Next Credit Shock?

JPMorgan’s investor day struck a deliberate balance between reaffirming strong fundamentals and signaling late-cycle caution. Financially, the presentation was steady and, in some respects, incrementally positive. But CEO Jamie Dimon’s tone — warning about elevated asset prices and creeping credit risk — kept enthusiasm in check. The stock, which has slid about 8% this year, remains pinned near its 200-day moving average, reflecting that tension between durable earnings power and mounting macro anxiety.

The most notable change in the outlook was a modest upgrade to net interest income. JPMorgan now expects firmwide NII of approximately $104.5 billion for 2026, up from a prior forecast closer to $103 billion. Excluding Markets, NII is expected to total about $95 billion, with Markets contributing roughly $9.5 billion. The increase reflects balance sheet growth and mix improvements, partially offsetting assumptions for lower policy rates. Management expects higher net interest revenue across most businesses, with the notable exception of home lending, which continues to struggle in a subdued housing market.

Loan growth remains healthy in certain segments. Card balances are expected to grow more than 6%, while business banking and auto loans should see modest expansion. In the Corporate & Investment Bank, loan growth is being supported by M&A activity, infrastructure financing, and demand tied to AI-related capital spending. Deposits are also expected to improve, with retail deposit growth resuming in 2026 at a low-to-mid single-digit pace as rate competition stabilizes and yield-seeking behavior moderates.

One of the more encouraging near-term datapoints was trading revenue. Management indicated first-quarter trading revenue is tracking up roughly in the mid-teens year over year, well ahead of consensus expectations in the mid-single digits. Investment banking fees are also pacing around 15% higher year over year. That suggests market activity remains robust despite volatility tied to AI-driven software selloffs and credit concerns. For a franchise of JPM’s scale, even modest incremental share gains in FX or rates trading can translate into meaningful revenue upside.

On the expense side, the bank reaffirmed roughly $105 billion in adjusted expenses for 2026, reflecting continued investment in talent, marketing, and infrastructure. Technology spending is set to reach approximately $19.8 billion this year, about 10% higher year over year, with a meaningful portion allocated to AI initiatives. Management emphasized that AI is already delivering productivity benefits, reducing fraud costs and improving operational efficiency. However, the firm was clear it will not relax underwriting standards to chase AI financing volume, despite strong demand in that area.

Credit conditions, at least for now, remain stable. The bank expects card net charge-offs to normalize around 3.4% in 2026, consistent with historical averages. Delinquencies remain favorable, wholesale credit is steady, and unemployment assumptions embedded in guidance sit in the mid-4% range. Importantly, management addressed concerns about exposure to software companies following last week’s Blue Owl episode and broader AI disruption fears. CFO Jeremy Barnum said JPM’s exposure to software is small relative to the size of the wholesale portfolio and concentrated in enterprise software rather than more vulnerable players.

That relatively calm credit picture stands in contrast to Dimon’s tone. He warned that elevated asset prices and aggressive competition resemble the pre-2008 environment, noting that “everyone is making a lot of money” and that some firms are “doing some dumb things” to generate net interest income. He cautioned that every credit cycle brings an unexpected weak spot and suggested software could be vulnerable this time due to AI disruption. His comments did not contradict JPM’s current credit metrics, but they underscored the idea that today’s benign conditions often precede stress.

Capital levels remain strong, with a 14.6% CET1 ratio and ample liquidity. The bank reiterated its through-the-cycle ROTCE target of 17%, after delivering 20% in 2025. Management framed that return profile as achievable across multiple macro scenarios, including recessionary environments, supported by diversification across consumer banking, investment banking, markets, and asset management.

Despite the upgraded NII guidance and strong trading commentary, shares have not meaningfully bounced. The muted reaction likely reflects lingering concerns about private credit, AI-related disruption, and the broader late-cycle dynamic Dimon highlighted. Investors appear cautious about extrapolating strong first-quarter markets revenue into sustained earnings upside if the credit cycle begins to turn.

In sum, the investor day reinforced JPMorgan’s earnings durability and balance sheet strength while simultaneously elevating awareness of systemic risk. The numbers remain solid, and guidance was largely reaffirmed with a slight improvement in NII. But Dimon’s anxiety about asset prices and leverage suggests the firm is positioning defensively even as it continues to invest aggressively in technology and growth. With the stock sitting on its 200-day moving average, the debate now centers on whether JPM is pricing in a soft landing or quietly bracing for a credit turn.