JPMorgan (JPM  ) shares were slightly higher, following the company topping earnings and revenue expectations for Q2. The earnings beat was driven by strength in equities and the release of loan loss reserves. While bank shares have been strong overall since the March 2020 bottom, in recent weeks, they have underperformed with the flattening of the yield curve.

Inside the Numbers

While this may affect the outlook for its stock price, it's not affecting near-term results as Q2 earnings indicate. JPMorgan reported $3.78 in earnings per share and $30.5 billion in revenue. Both were above analysts' expectations of $3.18 per share and $29.7 billion in revenue. The results were impressive on a year-over-year basis as EPS was 174% higher but revenue was down by 8%. This is due to the company's revenue surging as the Federal Reserve implemented its emergency programs.

Some of the negatives in the report were its bond trading revenue coming in below expectations, the downgrade of its outlook for net interest income given the decline in longer-term yields, and a lack of pickup in loan growth. The biggest catalyst for JPMorgan's earnings continues to be the economic recovery as loan loss reserves are a tailwind for earnings. Spending on credit and debit cards increased by 45%. Travel spending is also rebounding is back to 2019 levels but is showing signs of acceleration as June 2021 spending was 11% higher than June 2019. This part of the economy coming back is one of the final pieces of the recovery bubble in addition to the reopening of schools.

Consumer balance sheets are quite strong given the boost in incomes. Many paid off debt and are in a position to leverage themselves which is typical in later-stage recoveries and bull markets. This continued economic recovery is one of the biggest reasons to remain bullish on JPMorgan.

Outlook

The stock market has been interesting in recent weeks as many stocks are down 20-30%, while the indices are close to all-time highs. Another fact is that many stocks have rallied in line with earnings growth but haven't seen multiple expansion.

This describes JPMorgan as it has a forward P/E of 13 despite a 55% rally over the past year. It also pays a 2.3% dividend which is attractive given low Treasury yields. Therefore, shares remain attractive at current levels.