# Inflation cools and banks print record profits — long JPMorgan and Goldman Sachs

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

> Canonical page: https://commonquant.ai/research/for-you/inflation-cools-and-banks-print-record-profits-long-jpmorgan--fdbce50f-cd3a-4847-9bb7-45467f45c398

Inflation just fell for the first time in years, taking the pressure off the Federal Reserve to raise interest rates. At the exact same time, the biggest banks like JPMorgan and Goldman Sachs reported record profits from a massive boom in trading.

## Idea

JPMorgan and Goldman Sachs both just posted record trading revenues, proving their core businesses are firing on all cylinders. The June CPI report showed prices actually falling, which eases the threat of further Federal Reserve rate hikes. Lower inflation expectations are great for banks because they reduce the risk that high rates push the economy into a recession and hurt loan repayments. With strong earnings momentum and a friendly inflation backdrop, the big banks have a clear runway to continue rallying.

## Advanced Analysis

### Verdict: watch the breakout — record profits are real, but insiders sold the news

The thesis has two genuine pillars — per the July 14 Bloomberg piece, US CPI fell for the first time since 2020, and the same-day Yahoo Finance coverage has JPMorgan posting a record profit on a trading surge and Goldman beating on record equities trading, with JPM's return on equity at the 86.5th percentile of Financials peers and Goldman's at the 82.8th. The completed 60-month backtest also returns a positive 18.8% across 133 trades, though the 48.9% win rate means most trades lost and exits were filled on daily bars, so treat stop quality as approximate. The sharpest counterweight is ownership: for the June 30, 2026 reporting period (deadline passed), insiders were net open-market sellers at both banks — $29.3M at GS across 15 holders and $6.6M at JPM across 26 — plus JPM revenue growth of just 2.8% year over year, in the bottom half of peers. Nothing has triggered yet: GS closed at $1,029.18 versus the $1,030.79 breakout level with trend strength at 11.4 versus the 20 required, and JPM is $1.19 under its mark with trend strength at 9.1. The verdict flips decisively if trend strength crosses above 20 on both names with a close above $1,064.46 (GS) or $360 (JPM); a hot CPI print or continued insider selling into the next filing window would bury it. Until then, this is a watchlist setup, not a trade.

#### Conviction score breakdown

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

| Measure | Value |
| --- | ---: |
| Thesis support | 70/100 |
| Trade readiness | 30/100 |
| Risk quality | 55/100 |
| Backtest evidence | 55/100 |
| Fundamentals trend | 60/100 |
| Score | 54/100 |
| Composite Score | 54/100 |
| 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

Nothing has triggered yet, so the instruction today is wait, not buy. GS closed at $1,029.18, about $1.61 below the $1,030.79 breakout level the entry needs, and its trend-strength reading of 11.4 is well under the required 20 — the one condition still far from met. RSI at 49.5 (needs to be below 75) and price above the 10-day average of $1,026.46 are already satisfied, so the breakout plus a strengthening trend are the remaining gates. JPM is at $356.23, roughly $1.19 under its $357.42 breakout mark, with trend strength at just 9.1 — the same single missing ingredient. XLF sits at $57.25, only $0.04 shy of its $57.29 trigger, also waiting on trend strength (8.4 versus the 20 threshold).

"Wait" here means: do not chase price toward those breakout levels. The entry only goes live once trend strength crosses above 20 while price clears the daily Donchian high. If it does, the plan is long GS and JPM sized at a fixed 2.42% risk per trade, with a hard stop at a 2.42% loss and a 4% profit target — a reward-to-risk of roughly 1.65 to 1. Both legs also exit if price breaks below the 10-day average structure or a Fibonacci stop level; the nearest defined GS stop reference sits near the $1,001.70 support zone.

The evidence read: this rule set was backtested on the daily chart over 60 months, producing an 18.8% return across 133 trades with a 48.9% win rate and a worst drawdown of 8.0% — exits were filled on daily bars, so treat stop quality as approximate. The setup also traded on shorter windows (6.8% over 24 months), while the 12-month window produced no triggers at all, so patience is a feature of this design. Note that the parameter-sensitivity check did not establish a robust nearby setup — the published thresholds are used as-is, not optimized.

Catalysts could force your hand before trend strength confirms: the next dividend events are close (GS goes ex on September 1, 2026 at $5.00; JPM's next quarterly ex-date falls on October 6, 2026), and insider filings for the June 30 period already show net open-market selling at both banks (about $29.3M at GS and $6.6M at JPM) — a bearish backdrop worth respecting while you wait.

#### 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 |

### Record Trading Profits Meet a Finally Cooling CPI

The thesis is a two-legged story: a macro leg (falling inflation easing Fed pressure) and a fundamental leg (banks printing record profits). Both legs have concrete support in the data. The July 14 Bloomberg piece reports US CPI falling for the first time since 2020 with a flat core gauge, while per the same-day Yahoo Finance coverage JPMorgan posted a record profit on a trading surge and Goldman Sachs beat on record equities trading. That matches the reported fundamentals: JPMorgan's FY2025 net income of $57.0B on $182.4B of revenue (a 31.2% net margin) and Goldman's FY2025 net income of $17.2B with diluted EPS of $51.32, up 26.6% year over year. The profitability picture is sector-leading, not just improving. JPMorgan's return on equity of 15.7% sits at the 86.5th percentile of 889 Financials peers, and Goldman's 13.7% ROE ranks at the 82.8th percentile of the same peer set. Momentum is intact into the latest quarters: JPMorgan's quarterly ROE rose 1.12 percentage points from Q1 to Q2 2026 (4.53% to 5.65%) while its share count fell to roughly 2.66B, signaling buybacks alongside operating strength. Goldman's Q2 2026 net income of $6.63B was its strongest quarter in the supplied series, and its share count has been steadily reduced to about 291.4M. Capital return underpins the long case on any multi-week hold. Goldman's dividend has grown at a 38.5% annual rate, with trailing twelve-month payouts of $18 per share and a fresh $5.00 quarterly payment (ex-date September 1, 2026). JPMorgan has raised its payout 13.2% annually, most recently to $1.50 per quarter. Both boards increasing distributions at this pace is a signal of management confidence that complements the earnings record the idea leans on.…

#### GS Return on equity

Return on equity trend from CommonQuant fundamentals/XBRL data; -86.1% from first to latest point.

| Measure | Value |
| --- | ---: |
| 2007-11-30 | \0.27100467289719626% |
| 2008-11-28 | \0.03607326508101726% |
| 2008-11-30 | \0.03607326508101726% |
| 2008-12-26 | \-0.0121176342649412% |
| 2009-06-26 | \0.05468613185168675% |
| 2009-09-25 | \0.04878048780487805% |
| 2009-12-31 | \0.18928359306502252% |
| 2010-03-31 | \0.04737881114279448% |
| 2010-06-30 | \0.008304095151654723% |
| 2010-09-30 | \0.025086905375576615% |
| 2010-12-31 | \0.1079942085940328% |
| 2011-03-31 | \0.03774027515213402% |
| Latest Value | \0.03774027515213402% |
| Change Pct | \-86.07393933518979% |
| Ticker | GS |
| Timeframe | reported periods |

#### JPM Return on equity

Return on equity trend from CommonQuant fundamentals/XBRL data; -83.8% from first to latest point.

| Measure | Value |
| --- | ---: |
| 2007-12-31 | \0.12469465432028631% |
| 2008-06-30 | \0.015040247492040608% |
| 2008-09-30 | \0.03361834301269173% |
| 2008-09-30 | \0.003613474763958503% |
| 2008-12-31 | \0.03358620359051796% |
| 2009-03-31 | \0.012579761918751542% |
| 2009-06-30 | \0.031415168706305% |
| 2009-06-30 | \0.017581380923458644% |
| 2009-09-30 | \0.02211361269129076% |
| 2009-12-31 | \0.07291491808884329% |
| 2009-12-31 | \0.02037986881780596% |
| 2010-03-31 | \0.020191718117301374% |
| Latest Value | \0.020191718117301374% |
| Change Pct | \-83.80706997636192% |
| Ticker | JPM |
| Timeframe | reported periods |

#### GS sector percentile check

Ranks GS against 877 companies in its sector using CommonQuant fundamentals.

| Measure | Value |
| --- | ---: |
| Free cash flow | \0.45610034207525657th percentile |
| Return on equity | \82.7896512935883th percentile |
| Ticker | GS |
| Sector | Financials |
| Peer Count | 877 |

### Scores

- **Conviction score breakdown:** 54
- **Thesis support:** 70
- **Trade readiness:** 30
- **Risk quality:** 55
- **Backtest evidence:** 55
- **Fundamentals trend:** 60

### Watch items

- **GS — ADX (14)**
- **GS — Price vs Donchian (1) high**
- **JPM — ADX (14)**
- **JPM — Price vs Donchian (1) high**
- **XLF — ADX (14)**
- **GS — Insider net open-market value**
- **JPM — Insider net open-market value**
- **GS — Price vs nearest support**
- **GS — RSI (14)**

## Key details

- Symbols: GS, JPM, XLF
- Timeframes: D1
- Tags: \#banks, \#rate-cuts, \#macro, \#earnings

## Community

- Upvotes: 19
- Views: 297
- Copies: 0
- Cosigns: 0

## News sources

- [Goldman Sachs Q2 2026 earnings beat on record equities trading](https://finance.yahoo.com/markets/stocks/articles/goldman-sachs-q2-2026-earnings-120234207.html) — Yahoo Finance
- [US CPI Falls for the First Time Since 2020, Core Gauge Flat](https://www.bloomberg.com/news/articles/2026-07-14/us-cpi-falls-for-the-first-time-since-2020-core-gauge-unchanged) — Bloomberg
- [JPMorgan Chase Q2 2026 earnings: record profit on trading surge](https://finance.yahoo.com/markets/stocks/articles/jpmorgan-chase-q2-2026-earnings-115434127.html) — Yahoo Finance

## Related

- [GS trade ideas](https://commonquant.ai/stocks/gs)
- [JPM trade ideas](https://commonquant.ai/stocks/jpm)
- [XLF trade ideas](https://commonquant.ai/stocks/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 (12-month and 5-year, walk-forward tuned) and stress-tested before they can go live, then monitored against the news hourly while they run.