Despite recession fears, stocks continue to add to their year-to-date gains. We seem to be making steady progress toward a sustainable bull market. But we’ll continue to experience a roller coaster along the way.

Markets climb a wall of worry, and one of those worries had been first-quarter 2023 operating results from the big banks. However, defying expectations that they’d underperform, the largest U.S. banks last Friday kicked off earnings season with impressive numbers.

First-quarter report cards from the nation’s largest financial institutions underscored why they’re in stronger shape than their smaller peers to handle recent adversity.

The big boys stand tall…

Regional lenders may be struggling, but the money center boys are standing tall with robust balance sheets and solid profit growth.

The nation’s biggest bank, JPMorgan Chase (NYSE: JPM), blew the doors off its Q1 results. JPM reported a Q1 profit of $12.6 billion that was up 52% from the same quarter a year ago. JPM’s revenue of $38.3 billion was up 25% from the year-ago period. Wells Fargo (WFC), Citigroup (NYSE: C), and PNC Financial Services (NYSE: PNC) also posted robust results.

So much for a banking sector meltdown.

Financial services is a bellwether for the broader economy, so the Q1 outperformance of the banks was a welcome relief to Wall Street.

Read This Story: Goldilocks Is Back in Town

That said, the labor market is starting to cool, which will dampen consumer spending and keep a lid on inflation.

The overall economy should slow even further, because after all, about 70% of U.S. gross domestic product (GDP) is consumer spending. Last week’s jobless claims report was a “Goldilocks” scenario which showed employment conditions are simultaneously healthy and weakening.

Wage growth has decelerated from 6% to 4.2% over the last 12 months, a sanguine trend for inflation fighters. Headline consumer price index (CPI) inflation has decline substantially, from 9% last summer to 5% in March.

Also released last week was the March report on the producer price index (PPI), which measures wholesale prices. The PPI trend also is heartening, with PPI declining 2.5% in March compared to February.

The U.S. economy is sputtering, but it’s not screeching to a halt, either. American households are supported by more than $1 trillion in accumulated savings. This hoard should help shore up household spending, despite the softening of the labor market and economy.

Services-spending growth has fallen from an average of 12.0% in the second half of 2021 to an average of 8.9% over the last six months, a sign that overall consumption is declining, although from an elevated level.

An additional 25 basis point rate boost by the Fed at its next meeting in May remains the likely scenario, as Fed Chair Jerome Powell and his minions seek to demonstrate their toughness on inflation.

My view is that even if we get a recession this year, it’s likely to be brief and shallow, with the economy and stock market regaining momentum later this year as inflation and interest rate headwinds dissipate.

Wall Street seems to concur. Last week, the major equity indices in the U.S. and overseas notched another week of gains (see table).

It’s an auspicious sign that both the S&P 500 and the New York Stock Exchange Advance/Decline line both hover above their 200-day moving averages.

The consensus of analysts is that 2023 will end with double-digit gains for the S&P 500, somewhere in the low teens. On the way to those gains, volatility is likely to persist.

However, there’s money to be made in the mayhem that creates stock market uncertainty. That’s why we launched the Mayhem Trader investment service two years ago.

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John Persinos is the editorial director of Investing Daily.

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