JPMorgan’s Big Scandal Makes Its Stock Too Hot To Handle

JPMorgan’s Big Scandal Makes Its Stock Too Hot to Handle, #JPMorgans #Big #Scandal #Stock #Hot #Handle Welcome to O L A S M E D I A TV N E W S, This is what we have for you today:

In the world of business, reputation is everything. If a company doesn’t have a good reputation, it will be much more difficult to gain the trust of customers and business partners. Sooner or later, in that scenario, revenue and profits are likely to flatline or fall.

JPMorgan (JPM), the biggest bank in the U.S., provides a perfect example of this concept, as a major regulatory entity is investigating the company for alleged suspicious practices.

Only a few former JPMorgan employees are embroiled in the probe, but as they say, a few bad apples can ruin the whole bunch (or at least ruin their reputation).

In case that’s not enough to worry about, there are crucially important events coming up that could prove to be make-or-break for big U.S. banks in general and for JPMorgan in particular.

Therefore, it’s wise to watch and wait even if JPMorgan stock looks enticing at its current price point, as low prices can always go lower. I am neutral on the stock.

Interestingly, JPM has a 5 out of 10 Smart Score rating, giving it a “neutral” rating as well. This implies that JPM stock may perform in line with the overall market.

JPMorgan’s Big Scandal Makes Its Stock Too Hot to Handle

Dates to Mark on Your Calendar

Under normal circumstances, it makes sense to Buy a stock representing a huge company with a low price-to-earnings (P/E) ratio, especially if the company pays a generous dividend. However, it’s fair to say that these aren’t normal circumstances.

Sure, value seekers will point out that JPMorgan’s trailing 12-month P/E ratio is ultra-low, at 8.4. Usually, they would jump at the chance to scoop up JPMorgan shares when they’re close to their 52-week low, which currently is $109.30.

Besides, who could pass up JPMorgan’s 3.5% forward annual dividend yield? Don’t jump into the trade just yet, though. The principle of “look before you leap” applies to JPMorgan stock, as there are multiple upcoming events that could have a major impact on the share price.

Two serious concerns for JPMorgan are inflation and the actions of the U.S. Federal Reserve. High inflation and high interest rates both tend to inhibit borrowing and lending activity. When clients aren’t borrowing money, that’s bad news for JPMorgan’s bottom line, as the bank generates income from interest payments.

Additionally, high interest rates mean that banks will generally end up paying higher rates to their customers for savings accounts and other interest-bearing financial instruments.

This Wednesday is a day to mark on your calendar since that’s when the U.S. Consumer Price Index for June will be released. Economists expect that inflation increased 8.8% year over year in June. Such a high CPI reading would likely prompt the Federal Reserve to increase interest rates aggressively.

Along with that, you’ll want to mark Thursday on your calendar because that’s when JPMorgan will release its quarterly earnings report. This will be heavily monitored on Wall Street, as big banks are among the first mega-cap companies to report earnings, and JPMorgan is the first of these large banks to report.

Price Manipulation – Crime and Punishment

Already, there are too many unknowns to justify buying JPMorgan stock right now. A big earnings miss could send the share price lower, and so could a red-hot CPI print.

Adding to the worries is a Wall Street Journal report that U.S. Justice Department prosecutors are investigating some of the company’s former precious-metals traders. The prosecutors allege that those traders lied to regulators who investigated them for a price-manipulation tactic called spoofing.

It was claimed that JPMorgan precious-metal traders placed orders at high or low prices and then often canceled them in order to create a false impression of elevated supply or demand. This illegal spoofing tactic can be used to attempt to move asset prices in one direction or the other.

U.S. Justice Department prosecutor Lucy Jennings didn’t mince words in her accusation of these former JPMorgan traders and, by extension, of their bosses at the company. “Day in, day out for seven years, the defendants manipulated the market so that they could make more money… and then they lied to cover it up,” Jennings asserted.

So far, we know that three former JPMorgan traders will testify against three defendants. U.S. District Judge Edmond E. Chang has reportedly reserved up to six weeks for this trial, and that’s a month and a half of unwelcome publicity for JPMorgan. Furthermore, the reputational damage could last much longer than six weeks.

Wall Street’s Take on JPM Stock

Turning to Wall Street, JPM stock comes in as a Moderate Buy based on 11 Buys, six Holds, and two Sell ratings. The average JPMorgan Chase price target is $150.67, implying 33.5% upside potential.

JPMorgan’s Big Scandal Makes Its Stock Too Hot to Handle

The Takeaway – JPMorgan Could Head Lower

Even at its low current valuation, JPMorgan stock could get much cheaper. There are a number of things that could go wrong, such as an earnings miss, a hot inflation reading, and an unfavorable outcome to the Justice Department’s investigation.

The last thing you need is to own JPMorgan stock before a negative catalyst pulls the price down. Consequently, it’s sensible to watch for the latest developments but refrain from trading this stock for at least a couple of months.

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