The Weekend Spread: What’s Resonating?

Research evidence excerpt

The Weekend Spread: What’s Resonating?

Rob O'Dwyer - Specialist Sales - US Financials AC North America Specialist Sales J P M O R G A Nrob.odwyer@jpmorgan.com

J.P. Morgan Securities LLC 24 July 2026

Rob O’Dwyer

+1 2126222673

rob.odwyer@jpmorgan.com

Key Themes this Week

• Is the beta trade in regional banks over?

• Capital markets strength broadly visible

• Consumer credit - patience required

• Insurance - normalization?

XLF is essentially flat week-over-week but I bet that for most of us who follow fins, it won’t feel like it based on some of the

stock moves we’ve seen around earnings. The sector backdrop remains supportive – credit is largely benign, issuance is robust,

capital markets are active and consumers remain healthy – but getting the right side of positioning and earnings expectations

remains as important as ever. A few themes that stood out this week:

Is the beta trade in regional banks over?

Though regional banks (JP2RBK) remains the best performing subsector YTD, +19.5%, this earnings season is a nice reminder

that there might be some limits to just blindly buying this index. While the PPNR backdrop is improving in the aggregate, much

of the improvement is driven by fee income and that impact is clearly less helpful for the small regionals. We had some timely

reminders that credit risks remain as well – e.g. VLY's reserve build tied to CRE exposures and three previously unreserved non-

accrual loans, as well as FLG demonstrating worsening multifamily credit performance, higher NPAs and a lower earnings

outlook. In the context of these moves, I find it interesting to observe that USB has still underperformed VLY YTD despite the

fact that USB has much greater leverage to improving fees, as Vivek highlighted in his upgrade on Monday.