JPMorgan Outperforms the Nasdaq
Hedging Trump’s Tariffs
Rising Expectations for Share Buybacks at JPMorgan
Former U.S. President Donald Trump’s tariff policy continues to dominate headlines. Federal Reserve Chair Jerome Powell has also cited tariff-related uncertainty as a reason for maintaining a cautious stance on interest rate cuts. Beyond tariffs, tighter immigration rules and policies encouraging the reshoring of manufacturing facilities to the United States are adding to inflationary pressures—largely because U.S. labor costs remain relatively high.
Investments designed to hedge inflation risk are often referred to as the “Trump trade.” Commodities are typically used for this purpose, but with the exception of precious metals, commodity prices tend to be highly volatile, making them less suitable for many retail investors. One alternative during periods of elevated inflation pressure is commercial bank stocks. When loan growth continues and interest rates are maintained or rise, banks’ interest income naturally increases. This dynamic explains why bank stocks surged on the day of Trump’s election victory on November 6, 2024: JPMorgan rose 11.5%, Bank of America 8.4%, and Wells Fargo 13.1%.
Among U.S. banks, JPMorgan, the largest by market capitalization, has stood out. Since Trump’s election, JPMorgan shares have gained 16.2%, far outperforming the S&P 500 (+3.0%), the Nasdaq (+3.2%), and even Nvidia (-9.5%). On a one-year basis, JPMorgan has returned 39.9%, well ahead of the S&P 500’s 17.03% and the Nasdaq’s 18.94%.
JPMorgan’s return on equity (ROE) stands at 18%, significantly above the industry average of around 10%, while its recent earnings growth rate of 15% underscores both profitability and growth. CEO Jamie Dimon has long emphasized maintaining a “fortress balance sheet.” As a result, the bank’s Common Equity Tier 1 (CET1) ratio reached 15.7% as of the fourth quarter of 2024—comfortably exceeding the Federal Reserve’s required minimum of 12.3%.
JPMorgan posted $58.5 billion in net income in 2024. Given its high ROE and capital ratios, many analysts argue that the bank will have little choice but to expand shareholder return policies through dividends and share buybacks. If profits simply accumulate as capital, ROE—calculated as net income divided by equity—would inevitably decline, potentially fueling shareholder dissatisfaction. This logic mirrors Apple’s strategy: over the past decade, Apple has repurchased approximately $673 billion worth of its own shares, a move widely credited with supporting its share price. Similar expectations are increasingly being applied to JPMorgan.
ETFs with significant exposure to JPMorgan include RISE U.S. Banks TOP10 (0013P0), ACE Global Brand TOP10 Bloomberg (435040), and KODEX S&P 500 Financials (453650). Of these, the ACE ETF is not a pure financials product, as it also includes IT and consumer stocks. For investors seeking targeted exposure to U.S. financials centered on JPMorgan, the RISE and KODEX ETFs may serve as more suitable tools. The difference lies in portfolio structure: RISE holds a concentrated basket of ten large commercial and investment banks, while KODEX is a sector ETF diversified across 74 stocks, including payment companies such as Visa and Mastercard.
Before the establishment of the Federal Reserve in 1913, JPMorgan effectively played the role of a central bank during periods of financial crisis. During the global financial crisis that began in 2008, it acquired Bear Stearns and Washington Mutual. In the regional banking turmoil of 2023, JPMorgan stepped in to acquire First Republic, once again demonstrating its role as a cornerstone of the U.S. financial system.
With inflation pressures proving persistent and expectations rising for deregulation under a Trump administration, JPMorgan and U.S. financial stocks more broadly may offer a compelling diversification alternative to portfolios heavily concentrated in big tech.