Downgrades JPMorgan and Bank of America Shares Ahead of Earnings Season

Shares of JPMorgan Chase & Co. and Bank of America Corp. moved into the spotlight after Wolfe Research LLC downgraded both stocks, citing limited upside from current price levels.

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The decision comes as investors prepare for earnings season to begin next week, with the largest U.S. banks set to deliver their latest quarterly results. After a strong run that lifted financial stocks in 2025, analysts are signaling that expectations may now be running ahead of near-term fundamentals.

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Wolfe Research analyst Steven Chubak explained that the downgrade reflects valuation discipline rather than a negative shift in the banks’ underlying health. Following a powerful rally across the banking sector last year, he said the firm is “taking some chips off the table,” a phrase that underscores a more cautious stance after significant gains. In other words, much of the good news that supported bank stocks may already be priced in.

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The move highlights a broader recalibration taking place on Wall Street as investors reassess risk and reward ahead of earnings season. JPMorgan and Bank of America remain two of the most influential institutions in the U.S. financial system, with diversified business models, strong capital positions, and consistent profitability. However, when stocks trade near elevated valuation levels, even solid performance may not be enough to drive further upside without fresh catalysts.

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Bank shares benefited throughout 2025 from a favorable mix of higher interest rates, resilient economic growth, and stable credit conditions. Rising rates helped expand net interest margins, while consumer spending and corporate activity held up better than many had expected. These tailwinds fueled optimism and helped propel valuations higher across the sector, particularly for large, systemically important banks.

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As a result, investor expectations have climbed. With earnings season approaching, markets will be looking for confirmation that earnings momentum can be sustained. Any signs of slowing loan growth, softer net interest income, or rising expenses could prompt investors to reassess positions, especially given how far shares have already advanced.

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Wolfe Research’s downgrade reflects concern that the margin for error has narrowed. When valuations are stretched, even modest disappointments can weigh on stock prices. This dynamic is particularly relevant for JPMorgan and Bank of America, whose size and market influence mean their results often shape sentiment toward the broader financial sector.

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The timing of the downgrade is notable, arriving just before the earnings cycle begins in earnest. Quarterly results from major banks typically set the tone for financial markets, offering insight into consumer credit trends, business lending demand, and the overall health of the economy. Investors will be paying close attention not only to headline earnings but also to management commentary and forward guidance.

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While analysts are exercising caution, the downgrade does not suggest a bearish outlook on U.S. banks as a whole. Instead, it signals a shift from chasing momentum to managing risk. After a year of strong returns, some investors are choosing to lock in profits rather than add exposure at higher price levels. This more measured approach reflects the belief that future gains may be harder to achieve without a new growth driver.

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From a longer-term perspective, JPMorgan and Bank of America continue to benefit from structural advantages, including scale, diversified revenue streams, and robust balance sheets.

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These strengths position them well to navigate economic uncertainty and regulatory changes. For patient investors, periods of consolidation or pullbacks driven by valuation concerns may eventually create opportunities.

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Still, near-term performance will likely depend on how earnings stack up against elevated expectations. Markets will be watching trends in deposits, loan demand, and credit quality, as well as how banks are managing costs in a competitive environment. Updates on interest-rate sensitivity will also be critical as investors reassess the outlook for monetary policy.

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In this context, Wolfe Research’s move underscores the importance of selectivity within the financial sector. Rather than assuming broad-based gains, investors may need to be more discerning, focusing on banks with clear earnings visibility and disciplined capital management. The message is not that the banking sector’s story is broken, but that the easy part of the rally may already be behind it.

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As earnings season gets underway, JPMorgan and Bank of America will once again take center stage. Their results and outlooks are likely to influence sentiment not only toward bank stocks, but toward the broader market as well. For now, analysts appear to be urging caution, reminding investors that valuation matters — especially after a strong run.

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