The unofficial kick-off to earnings season began this morning with elevated expectations and the S&P 500 (SPX) near all-time highs. With a forward P/E of 22-times, the valuation on the S&P 500 is above historical highs, so the bar is high.

JPMorgan Chase (JPM) shares were up 20% this year and just 2.6% off of all-time highs from earlier this month into quarterly results this morning. JPMorgan reported 2Q adjusted EPS of $4.96 versus a consensus $4.47 and revenue of $45.68 billion vs $44.06 billion estimated. The firm said better-than-expected revenue from fixed income trading and investment banking were the drivers behind the results.

Jamie Dimon, Chairman and CEO, commented: "We reported another quarter of strong results, generating net income of $15.0 billion or net income of $14.2 billion excluding a significant item." Dimon continued, "Each of the lines of business performed well.” Investment Banking activity started slow but gained momentum as market sentiment improved, and IB fees were up 7% for the quarter. JPMorgan added approximately 500,000 net new checking accounts, which drove sequential growth in checking account balances. Asset management fees rose 10%, and they saw continued client asset net inflows of $80 billion, with client assets crossing over $6.4 trillion.

“The U.S. economy remained resilient in the quarter,” CEO Jamie Dimon said in the release. “The finalization of tax reform and potential deregulation are positive for the economic outlook. However, significant risks persist – including from tariffs and trade uncertainty, worsening geopolitical conditions, high fiscal deficits and elevated asset prices.” The stock is relatively flat in the premarket and may set the tone for earnings season. The financial sector is a proxy for economic health and could provide more fuel to the bullish momentum we’ve seen in stocks over the last three months.

Also on the earnings front, Wells Fargo (WFC) shares are under pressure despite beating estimates this morning. Wells Fargo reported 2Q EPS of $1.60 vs consensus $1.40 and revenue of $20.82B vs consensus of $20.76B.

Despite the earnings beat, the lender cut its expectation for annual interest income. Wells Fargo expects its interest income to be roughly in line with 2024 level of $47.7 billion. In April, the bank had forecast net interest income growth would be at the low end of the 1% to 3% range.

With the bar high for earnings season and stocks at elevated valuations, the upside may be limited as equities are near all-time highs. July is historically one of the best months for stocks but after the massive rally off of April lows, how long can the ‘Risk-On’ trade last? Earnings may be the key and should set the tone for stocks into the second half of the year.

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