Inflation and JPM Earnings

Kevin W. Frisz
Jan 13
5 min read

Updated: Jan 16

January 13, 2026

Summary

Okay, I surrender. There’s simply too much news. And the headlines change dramatically from day to day.

For example, just yesterday, we talked at length about the legal threat to Jay Powell. Sounds bad, right? Well, never mind! Last night, it came out that Jeanine Pirro, the US attorney for the DC office, had subpoenaed the Federal Reserve on her own accord. And in a late night tweet, she seemed to imply that she had no intention of actually indicting the Fed Chair. Well… okay. So cross that one of the list of risks, I guess.

But never fear, we have some new tweets today that are affecting the markets! So we’ll go through those.

Outside of the Trump administration news, we also have some normal market news. You know, earnings reports and economic data — stuff like that.

At the moment, the S&P 500 is down slightly, but there is a wide divergence in performance under the hood.

Monthly Inflation

This morning, we got the December inflation numbers. Core inflation was slightly lower than expected (+2.65% vs last year). So that’s good. Core goods (driven by lower car prices) were the big benefit this month. Services inflation was a little higher than expected due to a rise in shelter prices.

But let’s step back for a minute. Core inflation has been falling steadily since the peak in 2022. (See the chart below.) So, the trend is still going in the right direction, but it’s very stubborn. At this rate, it might be another year before we get below the Fed’s stated target of 2%.

Net-net, this probably wont move the Fed at all. The futures market still has only a 3% chance of a Fed rate cut at their meeting on Jan 28th.

The next meeting after that is March 18th. The futures market has only 24% chance of cut at that meeting, but we’ll obviously see how the data progresses over the next two months.

J.P. Morgan Earnings

Earnings season is upon us! As is tradition, we start with the banks. And today, we got the biggest one of them all – JP MorganChase (JPM). Regular readers know that we like to look at the credit card delinquency rates to get a sense for consumer stress. And the good news is that everything looks fine. Credit card repayment rates are about the same as last quarter and last year. That suggests there’s been no massive deterioration in consumer health. And that’s good, since personal consumption drives about 70% of our overall economy.

For JPM itself, results were mixed. There was some modest weakness in investment banking fees. But banking fees are lumpy from quarter to quarter, so there’s not a massive reason to be concerned. Guidance overall looked solid. Net interest income was slightly ahead of expectations, and we got increased details on the expense guidance for the year.

As usual, CEO Jamie Dimon gave some high level commentary about how he sees the market at the moment. I’ve summarized his comments below into bullet points:

How he sees the current environment:

- Consumers continue to spend

- Businesses are healthy

- Job market has softened but seems to be stabilizing

His reasons to be bullish:

- Fiscal stimulus

- Benefits of deregulation

- Fed’s monetary policy

His reasons to be cautious:

- Markets underappreciate potential hazards

- Complex geopolitical conditions

- Sticky inflation

- Elevated asset prices

That last one is particularly relevant for investors. Historically, markets do not fall because one day everyone wakes up and realizes that valuations are higher than before. Usually, there’s an event that pops the market (eg, Covid, tariffs, inflation, etc). In this column, we remain diligent for that event.

Swipe fees under attack from White House

Yesterday, we talked about how President Trump wanted to cap the interest rate on credit cards at 10%. As we discussed, that is highly unlikely to happen, as that would more or less destroy the credit card industry.

However, today, he’s tweeting about a new issue – the “swipe fee”. Every time someone swipes a credit card, a fee of roughly 1-3% gets charged to the retailer. That’s the target of his ire today. Senator Marshall (R-Kansas) has a bill that intends to reduce that fee. President Trump tweeted in favor of that bill. Sigh. Okay…

The bill targets Visa and Mastercard. So those stocks are getting hit today. The bill says that when a bank (eg, Chase or Citi) issues a credit card, they have to pick a second network besides just Visa and Mastercard. Then, the retailer can choose which network to run the transaction over – ie, they can use Visa or they can use a smaller one like NYCE if it’s cheaper.

However (and this is a big however), the fee to Visa and Mastercard is a small portion of that 1-3% swipe fee. The largest portion by far goes to the card issuer (ie, Chase and Citi). So, in order for NYCE to be cheaper than Visa, NYCE would need to cut the fee to the issuer (ie, Chase). So this bill would cut the profits at the banks who issue the credit cards.

So what’s the punchline? Well, if this bill happens, it would be bad for Visa, Mastercard, and the large banks who issue credit cards (ie, JPM, Citi, etc.). The immediate impact would be a big cut in rewards programs on credit cards. American Express would be exempt interestingly, but their acceptance rate might fall if their fees stayed high. Capital One would also be exempted because of their purchase of the Discover network last year.

Will this bill pass? Well, it’s a battle between two large lobbying groups – retailers and banks. The retailers obviously want this law to pass, as it would be a large cost savings to them. The banks however would take a hit to their card business.

In my personal opinion, I don’t think this bill will pass. Credit card users like rewards. And retailers might not pass any savings on to consumers. And even if they did, consumers might not notice it. But I’ve been wrong before! I’ll keep an eye on it.

Final Thoughts

Oil is spiking this morning (up +3% at the moment) after a post from President Trump to Iranian protestors that “HELP IS ON THE WAY!!” without providing detail about what that means. As we discussed yesterday, the President is scheduled to meet with his top advisers today to discuss military options. Any intervention would need to be nuanced. For an overthrow of the government to succeed, there needs to be a fracture among the powers in control. A direct military assault would likely have the opposite effect. So, we wait and see.

Looking ahead for the rest of this week, we will get earnings from the other large banks as well as key economic data, including retail sales.

Stay sharp, team.