J.P. Morgan Chase (JPM) came out of the last recession in a stronger position than it had entered. In the years since, CEO Jamie Dimon has repeatedly boasted of the firm’s “fortress” balance sheet, asserts Rich Moroney, editor of Dow Theory Forecasts.

That asset has become a competitive advantage, letting the bank opportunistically expand in the current downturn and potentially setting up a similar scenario to play out in the year ahead.

The volume of announced mergers and acquisitions snapped back to prepandemic levels in the September quarter, putting J.P. Morgan’s investment bank on pace for a year of record revenue. This momentum could lead to improved loan activity later next year.

Capital constraints ordered by the Federal Reserve during the pandemic ended J.P. Morgan’s nine-year streak of dividend growth. The Fed also issued a moratorium on stock buybacks for big banks.

With the economy showing signs of improvement, both restrictions may get lifted next year. J.P. Morgan’s dividend rose 9% to 28% in each of the past eight years, while stock buybacks slashed its share count 19% over that stretch.

J.P. Morgan shares trade at 12.6 times trailing earnings, slightly above their five-year median of 12.3 but below the median of 14.3 for diversified banks in the S&P 1500 Index.

At 14 times estimated 2021 earnings, the stock trades in line with its peers. Analyst expectations for the December quarter appear modest, with the consensus projecting 9% lower per-share profits and 4% lower sales.

For 2021, the consensus calls for J.P. Morgan to grow earnings 19%, despite a 5% reduction in revenue. The stock is gaining momentum, delivering a total return of 21% over the past three months, though it remains down 10% this year. J.P. Morgan, yielding 3.0%, is a Long-Term Buy.

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