To The Moon

It Is True.

Recent market intelligence from S&P Global and Nasdaq confirms the assertion that US bank stocks have faced significant downturn in 2026 is both mathematically and fundamentally sound.

While the broader market attempted to "climb a wall of worry" early in the year, the banking sector has been the primary casualty of a rapidly shifting geopolitical and macroeconomic landscape.

The Proof.

US bank stocks (among America's largest institutions) have endured sharp year-to-date declines through 20 Mar 2026.

It underscores the sector strains from credit pressures and geopolitical shocks and the $KBW Bank Index(BKX)$ is proof. (see below)

• On 02 Jan 2026, the Nasdaq Bank index opened at $167.06 /share.

• To date, BKX has fallen by -10.53% (as of 20 Mar 2026 closing), ending Friday at $149.46 /share.

YTD Decline.

To make the point more effectively, it is ‘necessary’ to delve into individual US banks to understand the extent of the decline in 2026.

As of 20 Mar 2026, the following financial institutions have seen multi-billion dollar erasures in their market capitalization:

$JPMorgan Chase(JPM)$

JPM - US #1 bank with a $3.9 trillion asset base, has not been immune to 2026's pressures.

JPM peaked on 06 Jan 2026 at $334.61 /share.

YTD, the stock has slid by -11.52% to $287.97 /share (as of 19 Mar 2026), shedding over -$37.51 /share in the process. (see below)

This occurred amid $15 billion quarterly deposit outflows and net interest income growth stalling at just 2%.

The decline accelerated on 27 Feb 2026, following warnings from the Consumer & Community Banking division regarding a $9 billion increase in 2026 operating expenses, driven by "structural inflation" and a massive pivot toward AI-integrated branch expansion.

$Bank of America(BAC)$

As a major US lending bank with $2.5 trillion in assets and high sensitivity to interest rate swings, BAC has not been spared in 2026.

On 6 Feb 2026 closing, it peaked with a closing price of $56.53 /share.

YTD, it has fallen by -15.98% , that is equivalent to a $8.94 /share loss, closing at $47.01 on 19 Mar 2026. (see below)

This decline reflects pressures from consumer loan delinquencies surging +15% to 1.8%, alongside deposit betas reaching 45% that eroded $1.2 billion in net interest margins.

The rout intensified with a -4.7% single-day crash on 27 Feb 2026, triggered by initial Middle East military mobilization signals.

Investors now price in a "nightmare scenario" of persistent high rates amid evaporating loan demand from war-induced economic cooling.

$Goldman Sachs(GS)$.

Last but not least, GS the investment banking giant was also hit hard..

At its peak on 15 Jan 2026, GS was priced at $975.86 /share as of 19 Mar 2026.

YTD, GS has fallen by -11.47% to $809.50 /share (as of 19 Mar 2026).

To date, it has lost -$104.84 /share, definitely not for the faint hearted. (see below)

The surge in Brent Crude to $110 and subsequent closure of the Strait of Hormuz have effectively "frozen" the global M&A (Mergers and Acquisitions) pipeline, which was supposed to be GS's primary engine for a 2026 recovery.

Key Catalysts.

Who or what are the main factors that caused the banks to fall ?

If one looks carefully, it is a buildup, layer upon layer of pressure / stress that cause US banks stocks to “cave in” finally.

(1) Financially.

In Q4 2025, loan loss provisions have ballooned by +25% sector-wide to $25 billion.

JPM alone, earmarked $3.2 billion (for credit cards) as charge-offs hit 3.1%.

By the time Q4 earnings were released, actual provisions were $4.66 billion, higher than:

• Bank’s own earmark.

• Wall Street analysts’ estimates of $3.86 billion.

• Q3 2025’s provision of $3.40 billion and Q4 2024’s $2.63 billion, that’s a +77.19% YoY gain.

Credit Quality Decay.

Household cash reserves have finally depleted to normal levels after years of savings buildup.

As a result, banks like JPM and BAC are seeing an uptick in net charge-off, that is actual losses from unpaid loans, rising between +0.5% to +0.8%.

This means banking consumers are "breaking" under prolonged high interest rates (still in the 3.5% - 3.75% range) and surging energy costs from the Iran war, that have eroded spending power.

It reinforces US banks faltering because higher charge-offs directly cut profits, force larger loan loss reserves (already up +25% sector-wide), and signal broader economic weakness hitting lending income.

(2) Economically.

Stagflation Trap.

On March 18, 2026, US Federal Reserve held rates steady at 3.50%–3.75% by 11-1 vote.

However, it raised its inflation forecast to 2.7% PCE.

The market has moved from expecting 4 rate cuts in 2026 to potentially 1 or 0 (zero), one cut per dot plot - creating a "stagflation" situation where stagnant growth combined with high inflation.

This will be where banks will suffer from rising "cost of funds" without the benefit of a growing economy.

Map of Middle East countries

(3) Geopolitically.

The Iran War & Energy Shock.

The Middle East conflict has triggered a "supply-side" inflation spike.

On 23 Mar 2026, the International Energy Agency (IEA) warned that the current crisis represents a loss of 11 million barrels of oil per day (bpd).

Gasoline prices in the US have risen by $0.05 - $0.10 cents per gallon daily - $0.27 in one week to $3.25 /gallon in March 2026 as 20% of global oil remained blocked in the Persian Gulf,

This acts as a regressive tax on consumers, raising the specter of mass defaults on credit cards and auto loans.

US-Iran war escalation :

• Drove oil up by +22% since the war began with Brent Crude reached $114 /barrel by 19 Mar 2026, before various quick-reliefs proposed by Trump to ease the ‘global’ energy crisis.

• Compressed net interest margins by 25bps to 2.95% across the big four (banks), while deposit growth slowed to 1% from 4%.

(4) Technologically.

AI disruption fears slashed lending outlooks.

It was reported that HSBC will be (a) slashing 20,000 jobs in the next 3 - 5 years by automating jobs in the middle and back office using AI, as well as exiting some businesses. (see below)

Analysts predict that this may trigger US big banks to follow suit, potentially resulting in a runaway mass layoff.

It is rumoured that GS, MS and Citibank have begun exploring the use of AI to replace a portion of the workforce, already.

Regulatory Relief.

On 19 Mar 2026, in a dramatic policy reversal, US regulators led by Fed Vice Chair Michelle Bowman (promoted by Trump) - together with FDIC and OCC, proposed a major softening of capital requirements to prevent a credit crunch.

The "Beef".

• The proposal is to lower the Common Equity Tier 1 (CET1) capital requirement for the largest banks by an average of 4.8%, that corresponds to an aggregate decrease of approximately 2.4% to 3.0%.

• This action if approved, could free up $20 – $30 billion for buybacks or dividends, in theory.

• The proposal is opened for public comments until 18 Jun 2026., with "capital unlock" kickstarting as early as late Q3 2026, if fast-tracked.

Risk :

• This policy ‘change’ is regarded as a "sugar high" for stock prices.

• However, its efficacy in a stagflationary environment is questionable.

• Lowering capital requirements during a war-induced energy crisis is a "pro-cyclical" move, as it makes banks more profitable in the short term.

• But it could also leaves them with thinner cushions if the Iran conflict escalates into a global depression.

Assume Capital Requirement Is Relaxed.

What happens if the capital requirements is relaxed - hypothetically ?

The most probable immediate effect is a massive injection of liquidity into the equity market through (a) share buybacks and (b) dividend hikes.

For the "Big 5," this will be double-edged sword: (see below)

Negative Impact:

• The timing is perilous.

• Relaxing capital standards during a war-induced stagflation cycle reduces the "safety buffer" exactly when systemic risk is peaking.

• If the Iran conflict leads to a deeper recession, banks may find themselves under-capitalized to handle a surge in non-performing loans (NPLs).

• Basically, the Fed is ‘risking’ long-term stability for short-term market liquidity, a move that could turn a manageable downturn into a systemic crisis if inflation remains "sticky."

Positive Impact:

It would artificially support stock prices and Return on Equity (ROE).

For JPM and BAC, which hold significant capital buffers, this could unlock an estimated $15–$25 billion each in "excess" capital., providing a temporary floor for the stock price even if earnings are flat.

Analysts are predicting that JPM’s unlocked resources will boost it's $50 billion buybacks (approx. 6.5% of its $773 billion market cap) announced back in 3 Jul 2025. (see below)

In Q4 2025, BAC’s average total loans and leases rose 8% YoY to approx. $1.17 trillion - $1.19 trillion.

As such, analysts are expecting BAC’s capital released, will go towards its loan business expansion inspite of current political headwinds.

My viewpoints: (mine only)

Personally, last week was painful. (see below)

US market sentiment shifted from fleeting cautiously optimistic (17 Mar 2026) to an aggressive retreat by the week's Friday. (see above)

All three major indexes broke below their baseline levels early in the week and failed to find a meaningful floor.

US market is expected to trade within a tighter, more nuanced range this week as it remains anchored to the Iran–Hormuz narrative.

Sentiment shifted slightly toward a risk-on posture after Trump postponed his 21 Mar 2026, threat to "hit and obliterate Iranian power plants" for 5 days.

Trump alluded the “delay” to a productive weekend talks between US and Iran.

The Truth Social tweet on Mon, 23 Mar 2026, provided immediate relief to global markets and eased the intense pressure on oil prices.

Sustainability of this reprieve is in question as Iran’s Fars agency has explicitly denied the existence of any direct or indirect negotiations with the US.

The contradiction casts significant doubt on the actual progress of de-escalation and suggests the market may currently be in a "calm-before-the-storm" phase.

Investors should remain hypersensitive to the Strait of Hormuz situation.

Any escalation in rhetoric, as the ultimate market direction hinges on whether military action is pursued following the expiration of the current five-day window or earlier.

Lest we forget, on 26 Feb 2026, US and Iranian officials met in Geneva and nearly reached a nuclear deal. They planned to finalize the details on 02 Mar 2026, but it did not happen.

This is because US attacked Iran 2 days later, after the 3rd round of talk in Geneva.

The time to reload on banking giants is not when the Fed offers a regulatory olive branch, but when global energy supply is no longer a hostage to the munitions of war.

No amount of capital relief can offset the systemic rot of a world that can no longer afford to move.

From an investment slant (less politics), investors should hold off buying bank stocks until (a) inflation peaks and (b) Fed’s policy clarity emerges post-June 2026 comment period.

Once the Fed’s rules are clarified and rolled-out, banks can safely use their “extra” cash for buybacks and lending activities, that will turn current risks into steady, long-term profits. Agree ?

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• Do you think an invasion of Iran by land is imminent ?

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