US Bank Earnings Poke Holes in Popular Recession Theory
- JPMorgan, Wells Fargo reported better-than-expected earnings
- Inverted yield-curve emerged ahead of past seven recessions
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The robust earnings at megabanks from JPMorgan Chase & Co. to Wells Fargo & Co. have poked holes in a popular theory: that an inverted yield curve hurts lenders and eventually leads to a recession.
The conventional wisdom, at least in some corners on Wall Street, is that banks borrow at short-term rates and lend long, so when the yield curve turns upside down, it squeezes lender margins, which eventually leads to a credit crunch.