While the stocks of companies like JPMorgan have been rising, the financial struggles facing ordinary Americans are evident in their financial reports.

The good times have returned for Wall Street investment banks, but what about ordinary people? The biggest conclusion drawn from the financial reports of America's largest financial institutions after this quarter is that the disparity is far-reaching.

JPMorgan, Citigroup, Wells Fargo & Co., Bank of America, Morgan Stanley, and Goldman Sachs have all told investors that one thing is certain: large trades are returning. This benefits traders, pushes up bank profits, and boosts their stocks. More trades are underway. Morgan Stanley's chief financial officer, Sharon Yeshaya, told analysts on Tuesday, 'Investment banking channels are healthy and diverse, the conversations are positive, and the market is open.'

After experiencing a period of extreme sluggishness, companies are beginning to seek advice from bankers once again to assist them with expensive acquisitions and sales, as the Fed seeks to stave off inflation by increasing the cost of borrowing. Executives and investors have been hesitant to act due to uncertainty in factors such as politics, regulation, and monetary policy.

As investors gain confidence that rates will fall later this year and the economy will avoid a recession, this hesitancy is beginning to fade away.

JPMorgan stated that its investment banking costs are up 52% from a year ago due to overall strong investment banking activity. Investment banking costs at Wells Fargo & Co., Morgan Stanley, and Citigroup rose 70%, 51%, and 63%, respectively. More trades are also occurring. 'Investment banking channels are healthy and diverse, the conversations are positive, and the market is open,' said Sharon Yeshaya, Morgan Stanley's CFO.

This desire for trading indicates that businesses' confidence in paying for or taking on additional debt for large deals is growing, reflecting economic stability. At the same time, the latest financial reports indicate that many consumers are struggling with stubborn inflation and high interest rates, making their situation extremely delicate.

Mark Mason, Citigroup's CFO, stated during a conference call discussing second-quarter financial results that American consumers have always been 'resilient,' but he noted behavioral differences between consumers with higher and lower credit scores and incomes. 'Among our consumer clients, only the top 25% by income have savings above their levels at the beginning of 2019,' Mason said.

Customers with FICO scores above 740 are driving spending growth, while those with lower scores are falling behind on repayments, according to Mason.

FICO credit scores are a type of personal credit rating developed by a US consumer credit evaluation company.

Wells Fargo also described a similar trend. Michael Santomassimo, the bank's CFO, said in a call with journalists that, overall, 'consumer remains strong.' However, he also acknowledged that as pandemic-era stimulus policies end and inflation continues, 'those who have wealth and income that are lower are more impacted, and I think that’s continuing.'

Alexis Deladerriere, head of international developed market equities at Goldman Sachs Asset Management, said that consumers accumulated savings during the pandemic, but 'now savings have been run down, and consumers are hurting because higher rates are really putting pressure on their finances. They are still spending, but they are very discerning.' He said this on July 9 at an event hosted by Goldman Sachs for the media.

The financial pressure on ordinary Americans has prompted JPMorgan to take more 'charge-offs,' i.e. to write off unpaid debts as losses because they do not believe they will be repaid. JPMorgan's net charge-offs increased $0.82 billion YoY to $2.2 billion, mostly from credit card holders, which the bank's CFO Jeremy Barnum attributed to a return to normalcy rather than a worrisome indicator. In the second quarter, consumer business segments at Wells Fargo and Bank of America grew 46% and 45% YoY, respectively.

In late June, UBS economists led by Abigail Watt told clients that the US economy is experiencing a "underestimated" slowdown, citing slowing GDP growth and weak retail and savings. She wrote:"The top of the income distribution is still well-off, but others ... are not as well-off."

At the same time, large borrowers are also hesitant about the direction of the economy. Barnum, CFO of JPMorgan, said on the company's earnings conference call that due to the impact of the economic environment on mid-sized and large enterprise clients, the demand for new loans is still weak.

All in all, bank investors have a lot to be happy about. The stock prices of Morgan Stanley, Goldman Sachs, and JPMorgan have hit historic highs, Bank of America's stock has seen its best performance since December, and Citigroup's stock is approaching its highest level in two years. Even Wells Fargo, which fell 7% on July 12 after announcing its earnings report, became the worst-performing company in the S&P 500 index that day, but its stock price in July rose 1.4% as of Tuesday's close. The likelihood of a Fed rate cut in September, expectations of reducing cumbersome regulations, and the possibility of a Republican sweep in the November US elections are all boosting bank stocks.

Bank stocks are performing as if all the concerns investors were discussing a month ago have disappeared. But that's not true. In fact, not at all. If the health of ordinary Americans worsens further, the rise may be short-lived.