🎙️ JPMorgan's Love Affair

How does Alphabet — aka Google — make money? Today’s chart provides an answer.

The search giant launched in September 1998 in Silicon Valley, weathering the dot-com bubble burst and leaving Yahoo in the dust on its ascent to becoming the world’s fourth-largest company by market cap ($1.8 trillion).

Hey, got a question? Just Google it.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the three biggest stories in markets:

• The reasons groceries have stayed expensive

• Why JPMorgan is doubling down on brick-and-mortar

• The best-performing U.S. cities

All this, and more, in just 5 minutes to read.

Chart of the Day

In The News

🛒 Inflation Has Fallen. Why Are Groceries Still So Expensive?

If inflation has fallen, why doesn’t it feel that way at the grocery store? 

Prices for gasoline, used cars, and health insurance have fallen recently. But grocery prices remain stubbornly high, jumping by 25% over the past four years, outpacing overall inflation (19%) over the same period. 

Even in the past year, groceries got slightly more expensive, particularly for beef, sugar, fresh produce, and juice. Two-thirds of Americans say inflation has hit them hardest via high food prices — 50 percentage points higher than any other category.  

A few reasons:

• Ongoing supply chain issues 

• Droughts and extreme heat destroy crops

• Avian flu

• Labor shortage

• Robust consumer demand and consolidation in the industry gives large chains the ability to keep prices high

Noted one economist: “I think people are waiting for prices to return to what they call ‘normal’ — and with the exception of a few things, like eggs — we’re not going to see that. We’re going to see prices stabilize, and that’s likely it.”

Why it matters:

As The Washington Post reports: High grocery prices “represent a critical drain on the finances of tens of millions of people and remain, along with housing, perhaps the most persistent economic challenge for the Biden administration as it tries to convince Americans the economy is back on solid footing.”

Case in point: A growing number of lower-income Americans rely on assistance programs and food banks to put food on the table. 

In fairness, it’s not all bad. The growth rate for grocery prices cooled last year to 1.3 percent from 11.8 percent. Eggs prices dropped 20% in 2023, lettuce fell 17%, and tomatoes fell 7%.

• Still, people are willing to shop often and spend more at the grocery store. It’s largely about supply and demand — and demand is high.
   

• Added another economist: “People started spending a ton on groceries during covid and for a large subset of Americans, that’s stuck. They’re saying, ‘I’m still going to get that rib-eye or New York strip even if it costs more’ — and that pushes prices further up.”

Watch more

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🏦 JPMorgan Doubles Down on Brick-and-Mortar

Personal finance has gone digital, but JPMorgan didn’t get the message. This week, the megabank announced plans for one of its most aggressive expansions of physical branches, aiming to add over 500 new U.S. locations by 2027.

That comes in addition to the 650 new branches opened in the past five years. It has by far the most branches, eclipsing Bank of America by over 1,000 locations.

• While other banks try to go more digital, investing in slick apps, JPMorgan sees room for both. 2023’s record profits for the bank leave it with no shortage of resources to allocate, either.
  

• Said JPM’s Consumer Banking CEO, “Our branch network is one of the key reasons that customers open accounts with us…(they’re) an anchor for us to expand our relationship with customers.”
  

• Another JPM exec said the bank has “a love affair with branches.”

Why it matters:

The bank is proudly the first to have branches in all 48 contiguous U.S. states. With $2 trillion in deposits, double the amount from a decade ago, JPM is a behemoth.

Despite wielding 12% of all deposits in the U.S. banking system, JPMorgan wants to grow that share to 20%, and more branch locations are central to that strategy.

Branches, really? Yes, branches have less foot traffic than in the past, and most banking transactions occur online or in mobile apps. However, branches can effectively attract new customers in regions where JPMorgan has a smaller presence.

• They’re also helpful for building relationships with small businesses and upselling customers on financial services beyond checking & savings accounts, like credit cards, wealth management, personal loans, and mortgages.
  

• In some low-income neighborhoods, bank branches have reportedly become “community centers” and hubs for financial literacy classes.

One ambitious goal: JPMorgan wants to put 70% of the U.S. population within a 10-minute drive of its branches.

Read more

More Headlines

🧐 Adam Neumann is trying to buy bankrupt WeWork

🎧 Spotify is starting to lose less money 

📺 YouTube has become one of the biggest paid TV services in the U.S.

💳 Americans’ credit card balances exceeded $1 trillion in the third quarter of last year

🤑 China is pumping money into stocks

🚀 Palantir shares rocket 30% on strong AI demand

🌆 The Best-Performing U.S. Cities

After assessing 403 metro areas across 13 economic metrics from January 2022 to August 2023, the Milken Institute, a nonpartisan nonprofit, has released its list of America’s best-performing cities.

High rankers score well for offering strong wages, ample jobs, comparatively low costs of living, and booming tech sectors.

• Topping the list: Austin, Raleigh, Boise, Salt Lake City, and Provo, Utah.
  

• For larger metro areas, Nashville, Dallas, Olympia, and Charlotte ranked highest.

Said one of the report’s authors, “These rankings really look at growth…these are the cities that are growing the fastest.”

While cities like New York and San Francisco have a large presence, much of their growth has already occurred. The Milken report focuses on up-and-coming areas.

Why it matters:

For large metro areas, the biggest gainers on this year’s list were Philadelphia; Elgin, Illinois; Houston; Richmond, Virginia; and Wichita, Kansas.

• Job gains, especially in leisure and hospitality, particularly helped these cities.

Meanwhile, four of the five biggest losers were in California (San Luis Obispo, Modesto, Merced, and Oxnard), with the other being Greensboro, North Carolina.

• These cities were hit by low wage growth and mounting “income inequality.”

With the U.S. labor market creating more than 6 million jobs in 2022, some 90% of those were in metro areas. Yet, the distribution between metro areas has evolved. Sun Belt cities and Texas are increasingly pulling jobs away from New York and LA.

Read here for the full report

Quick Poll

Yesterday, we asked: Do you believe Amazon Prime is worth the cost?

— Wrote one reader, “No! Amazon is behaving like the cable business nickel and diming the consumer. The flip side is their subscriptions are increasing along with volumes which should mean lower costs for the consumer. Unfortunately, they aren’t passing along the savings but padding their bottom line.”

— On team Yes, “When you divide $139 by 12, you get $11.58/mo. The entertainment value alone is worth the cost when you compare it to the cost of other streaming platforms. Also, the benefit of not only 2 day, but many times next day shipping, it's hard to beat.”

— Added another, “Convenience is worth it, plus I make more than the subscription rate back through prime credit card points.”

— One more voting Yes, “Largely because of the multitude of small value items ordered that attract free delivery. Not having prime would require a lot more time to combine items into bulk orders to reduce transport costs.”

See you next time!

That's it for today on We Study Markets!

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