🤝 Congrats, JPMorgan

What’s going on here?

JPMorgan might’ve had a less-than-stellar final quarter of the year, but the banking goliath well and truly recovered by announcing a record-breaking full-year profit.

What does this mean?

JPMorgan made almost a third more profit than the year before, banking a record high just shy of $50 billion – and that was mainly thanks to rising interest rates. See, JPMorgan makes the bulk of its money by bringing in more interest from loans than it pays out. And last year, the bank used rising interest rates to its advantage, charging borrowers more than usual without paying as much interest out to saving account owners. The difference is known as net interest income, and that alone brought in almost $90 billion last year. Investors certainly saw the dollar signs: JPMorgan’s shares climbed 22% over the year.

Why should I care?

For markets: JPMorgan’s a big, fat fish in a small pond.

JPMorgan’s success will only rub salt in other big banks' wounds. Bank of America fell short of expectations, while Citigroup rounded off its worst quarter in 15 years with expansive job cuts. But don’t write off the duo just yet: big banks’ results are often compromised by one-off snags, like underperforming trading teams or occasional chunky expenses.

The bigger picture: Bad luck, little guys.

Bigger is better, at least when it comes to running a bank during an economic downturn. JPMorgan’s hardened reputation makes borrowers and savers trust that if it came into trouble, the government would help steady the company and keep their cash safe. So while smaller banks are pulling up saving rates to incentivize customers to stick around, big banks like JPMorgan don’t need to follow suit. Plus, they can use that extra cash to scoop up any smaller institutions that crumbled under the pressure.

What’s going on here?

The US and UK commenced strikes against the Houthi militant group in Yemen.

What does this mean?

Many of the world’s most powerful armed nations have been at loggerheads over the last couple of years. So these days, the slightest threat of conflict can make folk call up a nuclear-bunker specialist. Thing is, the Iran-backed Houthi movement isn’t exactly popular in the Middle East. In fact, Saudi Arabia waged its own unsuccessful war against the group in 2015. So this pushback from the West isn’t likely to spill over into the region at large – but with the Houthi group vowing to keep targeting freight ships in the Red Sea, the battle won’t be quickly won or lost.

Why should I care?

For markets: This is our issue.

The US and UK are making it clear that their red lines aren’t just written in ink. But no matter how much they reinforce their boundaries, the Houthis aren’t guaranteed to respect them. If the militant group keeps compromising cargo ships and oil tankers, goods traders will need to take longer – read: pricier – detours around Africa. That’ll make the contents of every precious shipping container more expensive. And don’t count on retailers to take the hit: they’ll pass on every cent they can to their customers, potentially stoking up inflation just when it’s showing signs of losing steam.

The bigger picture: The new normal.

Naturally, higher prices for oil and commodities will make just about everything on a store shelf more expensive. But no company wants to keep prices up for too long, otherwise budget-conscious shoppers could take their business elsewhere. That means they’ll cut costs elsewhere in their supply chain or switch to cheaper suppliers. So while conflict can spike costs at the time, the effects tend to level off after a few weeks or months. Just think: despite two wars raging, today’s oil price is lower than it was right before Russia invaded Ukraine.