# Big banks just passed their stress tests with flying colors while tech wobbles — rotate into JPMorgan and Goldman

_AI-generated trading idea · LONG · GS, JPM, XLF_

> Canonical page: https://commonquant.ai/research/for-you/big-banks-just-passed-their-stress-tests-with-flying-colors--a878c6f2-17ab-4511-a56e-9c11f8b809fd

Big banks just got a clean bill of health and are buying back massive amounts of their own stock and raising dividends. Meanwhile, tech stocks are wobbling and the President is pushing for interest rate cuts, which creates a perfect environment for money to rotate into safe, profitable bank stocks.

## Idea

The Federal Reserve gave every major bank a passing grade on its stress tests, allowing giants like JPMorgan and Goldman Sachs to unleash $50 billion in stock buybacks and dividend hikes. While the broader S&P 500 sits at a dangerous technical cliff and tech stocks sell off, the banking sector is flush with cash and returning it to shareholders. Additionally, Trump's recent backing off of the Fed chairman suggests potential rate cuts ahead, which usually helps banks' profit margins.

## Advanced Analysis

### Verdict: The bank capital-return story is real, but JPMorgan is 1.2% away from a live entry — wait for it

The strongest case for this trade is the capital-return machine: per the CNBC stress-test report of June 24, 2026, JPMorgan unveiled a $50 billion buyback while Goldman raised its dividend — Goldman's annual payout has compounded from $6.50 in 2021 to $14 by 2025–2026, a 38.5% growth rate, and both banks' Q2 2026 net income rose sequentially (JPM up 28.3% to $21.2B; GS up 17.7% to $6.6B). The strongest case against is the insider tape: as of the reporting period ended June 30, 2026, net open-market insider selling stood at $29.3 million at Goldman across 11 reporters and $6.6 million at JPMorgan across 19 — a measured negative posture from the people closest to the numbers, sitting right on top of the entry point. Meanwhile the live rules are close but not confirmed: JPM has three of four entry conditions met and needs a close above $366.50, about 1.2% above the last close of $362.06, while GS and XLF remain well away from their momentum and trend-strength thresholds. The 60-month backtest returned 56.9% on 223 trades with a 48.4% win rate and a 26.5% maximum drawdown, and the more recent 24-month window was better-behaved (48.0% return, 11.3% drawdown) — but with inflation above 4% per the June 26 CNBC report, the rate-cut tailwind the thesis leans on could be deferred. My verdict: wait, with an alert at $366.50 on JPM. One caveat on the research itself — the parameter-sensitivity evaluation ran out of time, so no robust nearby setup was established to fall back on if the published configuration degrades.

#### Conviction score breakdown

Composite score computed by the server from the applicable evidence-tier dimensions.

| Measure | Value |
| --- | ---: |
| Thesis support | 78/100 |
| Trade readiness | 55/100 |
| Risk quality | 58/100 |
| Backtest evidence | 68/100 |
| Fundamentals trend | 72/100 |
| Score | 66/100 |
| Composite Score | 66/100 |
| Evidence Tier | backtested |

#### Decision scenarios

Bull, base, and bear cases synthesized from the cited evidence tier. Likelihoods are rounded evidence-weighted judgments, not statistically calibrated forecasts.

| Measure | Value |
| --- | ---: |
| Evidence Tier | backtested |

### Trade now: JPM is one breakout away — GS and XLF still need to turn

The rotation idea is long the banks while tech struggles, and the live tape says JPMorgan is the closest name to a trigger. JPM closed at $362.06 with its 20-day rate of change at +0.8%, its trend-strength gauge at 27.6 (above the 25 threshold), and price sitting $5.89 above its 20-day average — three of the four entry conditions are already met. The remaining condition is a close above the nearest resistance at $366.50, about 1.2% above the last close. Note that the five-name setup shares indicators across symbols, so a single JPM entry can arm the broader rotation trade.

Goldman Sachs and the sector ETF are further away. GS closed at $1,037.93 with a 20-day rate of change of -2.1% (needs to be above zero) and trend strength at 14.1 (needs to be above 25); only its price-above-average condition is met. XLF at $58.56 shows positive momentum (+1.3%) and a price above its average, but trend strength is just 8.8 — the weakest link of the three.

Once a position is open, the risk framework is mechanical: a 2.6% stop loss against a 5.2% take profit, roughly a 2:1 reward-to-risk profile, with level-based exits layered on (for JPM, a stop below the nearest support at $360 and a profit target near the $343.62 level on the chart). Position size is capped at 20% of the book with fixed 2.6% risk sizing.

What does waiting mean concretely? Do nothing today on GS or XLF — their triggers are not live. Set alerts at $366.50 on JPM, at a positive 20-day momentum turn plus trend strength above 25 on GS, and at trend strength above 25 on XLF. The strategy's own completed backtest gives the context for patience: over 60 months it produced a 56.9% return on 223 trades with a 48.4% win rate and a 26.5% maximum drawdown — entries fire dozens of times a year, so there is no cost to letting the conditions come to you.

#### GS price and trigger map

Uses the idea timeframe and keeps price levels on the price axis.

| Measure | Value |
| --- | ---: |
| Ticker | GS |
| Timeframe | 1d |

#### JPM price and trigger map

Uses the idea timeframe and keeps price levels on the price axis.

| Measure | Value |
| --- | ---: |
| Ticker | JPM |
| Timeframe | 1d |

#### XLF price and trigger map

Uses the idea timeframe and keeps price levels on the price axis.

| Measure | Value |
| --- | ---: |
| Ticker | XLF |
| Timeframe | 1d |

### Two Bank Giants Earning Near-Record Returns on Equity, Backed by a Working Rotation Signal

The core of this thesis is capital strength, and the numbers back it up. Per the CNBC piece on the Fed stress test (June 24, 2026), JPMorgan unveiled a $50 billion buyback and Goldman raised its dividend — and the filings behind those headlines show real earnings power: JPM's Q2 2026 net income rose to $21.2B, up 28.3% from $16.5B in Q1, while Goldman's quarterly net income climbed to $6.6B, a 17.7% improvement quarter over quarter. Both banks posted return-on-equity jumps in the same period — Goldman to 5.4% for the quarter (a 17.8% sequential gain) and JPMorgan to 5.6% (up 24.6%) — placing each in the top quintile of Financials sector peers on a full-year basis (Goldman's 13.7% ROE sits in the 80.6th percentile; JPM's 15.7% in the 84.8th). Shareholder returns are increasingly funded by a shrinking share base: Goldman's outstanding shares fell to 291.4 million from 294.6 million in a single quarter, continuing a multi-year decline from over 500 million shares in 2008, and JPM's count dropped 0.8% to 2.66 billion. The dividend trail corroborates the capital-return story rather than contradicting it. Goldman's annual dividend per share has grown from $6.50 in 2021 to $14 by 2025–2026 — a 38.5% growth rate — while JPMorgan's rose from $3.70 to $5.55 over the same span, with a latest quarterly payment of $1.50. Companies do not compound payouts at that pace while hoarding cash out of weakness; it reflects confidence in earnings durability, consistent with the stress-test clean bill of health cited in the idea. The macro framing also has support in the cited news. The MarketWatch piece (June 25, 2026) flags the S&P 500 at a critical technical crossroads with risk of further losses, and the CNBC report (June 26, 2026) notes the President easing pressure on the Fed as inflation runs above 4% — the rate-cut environment the idea argues would support bank margins and drive rotation out of wobbling tech and into profitable, capital-returning banks. Critically for a strategy reader, this is not just narrative — it is a backtested rotation idea, and the completed backtest statistics are favorable. Over the full 60-month evaluated window the system traded 223 times on the daily timeframe and returned 56.9%, with a 48.4% win rate and a worst peak-to-trough equity decline of 26.5%. The record improved in more…

#### GS Debt to equity

Debt to equity trend from CommonQuant fundamentals/XBRL data; -12.8% from first to latest point.

| Measure | Value |
| --- | ---: |
| 2009-12-31 | \2.775801114347937 ratio |
| 2010-06-30 | \2.5871388125008465 ratio |
| 2010-09-30 | \2.6047821087275467 ratio |
| 2010-12-31 | \2.433515176586173 ratio |
| 2011-03-31 | \2.525949026480288 ratio |
| 2011-06-30 | \2.532215711205705 ratio |
| 2011-09-30 | \2.639824220979341 ratio |
| 2011-12-31 | \2.582077040026144 ratio |
| 2012-03-31 | \2.503670313721112 ratio |
| 2012-06-30 | \2.420396678333677 ratio |
| Latest Value | \2.420396678333677 ratio |
| Change Pct | \-12.803670773716377 ratio |
| Ticker | GS |
| Timeframe | reported periods |

#### GS sector percentile check

Ranks GS against 691 companies in its sector using CommonQuant fundamentals.

| Measure | Value |
| --- | ---: |
| Free cash flow | \0.5788712011577424th percentile |
| Return on equity | \80.58035714285714th percentile |
| Ticker | GS |
| Sector | Financials |
| Peer Count | 691 |

#### JPM sector percentile check

Ranks JPM against 896 companies in its sector using CommonQuant fundamentals.

| Measure | Value |
| --- | ---: |
| Return on equity | \84.82142857142857th percentile |
| Ticker | JPM |
| Sector | Financials |
| Peer Count | 896 |

### Scores

- **Conviction score breakdown:** 66
- **Thesis support:** 78
- **Trade readiness:** 55
- **Risk quality:** 58
- **Backtest evidence:** 68
- **Fundamentals trend:** 72

### Watch items

- **JPM — Close vs nearest resistance**
- **GS — ROC (20)**
- **GS — ADX (14)**
- **XLF — ADX (14)**
- **JPM — Next ex-dividend date**
- **GS — Next ex-dividend date**
- **JPM — Insider open-market net value**
- **GS — Insider open-market net value**
- **JPM — QQQ 20-day performance vs banks (exit condition)**
- **GS — ROC (20) above 0**
- **GS — ADX (14) above 25**
- **GS — Price above EMA (20)**

## Key details

- Symbols: GS, JPM, XLF
- Timeframes: D1
- Tags: \#banks, \#rotation, \#macro, \#defensive

## Community

- Upvotes: 32
- Views: 98
- Copies: 0
- Cosigns: 0

## News sources

- [Trump eases pressure on Fed Chairman Kevin Warsh as inflation tops 4%](https://www.cnbc.com/2026/06/26/trump-warsh-fed-rate-cuts-inflation.html) — CNBC
- [The S&P 500 is at a critical crossroads. A break lower could signal more losses ahead.](https://www.marketwatch.com/story/the-s-p-500-is-at-a-critical-crossroads-a-break-lower-could-signal-more-losses-ahead-f425063c?mod=mw_rss_topstories) — MarketWatch
- [JPMorgan Chase unveils $50 billion buyback, Goldman Sachs raises dividend after Fed stress test](https://www.cnbc.com/2026/06/24/jpmorgan-goldman-sachs-fed-stress-test.html) — CNBC

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## Related

- [GS trade ideas](https://commonquant.ai/markets/gs)
- [JPM trade ideas](https://commonquant.ai/markets/jpm)
- [XLF trade ideas](https://commonquant.ai/markets/xlf)
- [Latest market news](https://commonquant.ai/news)

## About CommonQuant Research

Ideas and Advanced Analysis are generated with fresh, LLM-selected news headlines and grounded in SEC XBRL fundamentals and peer percentiles. Strategies built from these ideas are automatically backtested (over a timeframe-dependent historical window with walk-forward tuning) and stress-tested before they can go live, then monitored against the news hourly while they run.