Trading Desk: Big Banks Brace For Recession

Three of the four biggest U.S. banks reported their latest quarterly numbers this morning and were rewarded for buttressing their balance sheets for a recession. If you’re worried about the economy, this is now the place to be.

Just do the math. JPMorgan (JPM) pushed $808 million in operating profit back into its reserves, sending a signal that Jamie Dimon and his team expect that roughly that much of their loan portfolio will blow out in the foreseeable future.

It looks like a huge number. But against a $1.1 trillion loan book, it doesn’t exactly signal the end of the world . . . only a dip in the road. Likewise, Citi (C) and Wells Fargo (WFC) only bumped up their reserves a total of $755 million between them.

And investors collectively poured $10 billion into the stocks in response. This is apparently not bad news for the banks at all. Again, it’s a dip in the road.

The rest of the market melted down, starting with the big brokerage firms. Morgan Stanley (MS), Charles Schwab (SCHW) and Goldman Sachs (GS) all sold off, taking the world’s trading companies down with them.

You know people are overreacting when Robinhood (HOOD) and Raymond James (RJF) drop in unison. Totally different stocks. Same swoon.

But the lenders are showing some strength. If this is as bad as it gets, it won’t be so bad after all.

And the airlines are doing well. Americans have enough money to fly. I suspect they have enough to keep paying their bills as well.

The bankers see a recession on the horizon. It might be short and shallow. Now we just need to get Wall Street’s relief to spread.