Banks Lead the Dow Despite Long-Term Challenges

Goldman Sachs and JPMorgan Chase are leading the Dow Jones Industrial Average, but the long-term profit picture from both banks is getting cloudy.

Jan 15, 2014 at 3:30PM

The Dow Jones Industrial Average (DJINDICES:^DJI) is up 0.68% today in last-minute trading as a report from the Federal Reserve and earnings releases give investors continued confidence in the stock market. The Fed's Beige Book said consumers are spending more, manufacturing is improving, and real estate is improving, which should all drive economic growth and hiring. None of this is particularly surprising, but investors sometimes need reinforcement from the Fed. 

The other positive data point out today was the Mortgage Bankers Association announcement of a 12% jump in mortgage applications last week. Rates were down slightly and homebuyers jumped on the lower costs, although adjustments for the holidays may have skewed data.

Big banks lead the charge
JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS) are leading the Dow today, climbing 3.1% and 1.5%, respectively. JPMorgan's $5.3 billion profit, or $1.40 per share, in the fourth quarter helped investors believe the megabank can move past a series of legal settlements with the government, while Goldman is up in anticipation of its earnings report tomorrow morning.  

Former Dow component Bank of America (NYSE:BAC) is probably pulling all of the big banks higher after reporting a huge jump in net income, from $367 million a year ago to $3.18 billion in the fourth quarter.  

There's no doubt that bank earnings are stabilizing, but there are some holes forming in the long-term growth story. First, mortgage rates are up over the past six months and that has resulted in a sharp drop in loan originations at all three banks.  

US 30 Year Mortgage Rate Chart

US 30 Year Mortgage Rate data by YCharts.

Then there's the government crackdown that's already hit JPMorgan and is likely coming for Goldman Sachs and Bank of America this year. The latter's litigation expense, including reserves, increased from $1.1 billion in the third quarter to $2.3 billion in the fourth quarter, a sign that BofA knows the feds are coming.

Finally, increased regulations on big banks will keep trading profits from growing in the future, and that's been the fuel behind Wall Street for more than a decade.

The big banks are making money again, no question about it, but the growth opportunities present for companies of that size under intense scrutiny are limited. I just don't see these as high growth stocks in the future.

Do you want to buy stocks you can own forever?
Investing long-term is the best way to beat the market and our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Fool contributor Travis Hoium manages an account that owns shares of JPMorgan Chase. The Motley Fool recommends Bank of America and Goldman Sachs. The Motley Fool owns shares of Bank of America and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers