Will the US economy pass its first test after the interest rate hike?

The six largest banks in the US will publish their third-quarter 2026 reports this week. The article examines how the high-interest-rate environment and the surge in bond yields affect bank profits, demand for credit, and the risk of default. The KBWB ETF has risen by about 20% over the past year but has weakened in recent weeks.

The six largest banks in the US – JPMorgan, Citigroup, Wells Fargo, Goldman Sachs, Bank of America, and Morgan Stanley – are expected to publish their third-quarter 2026 reports this week. The reports are expected to shed light on the impact of the high-interest-rate environment and the rise in bond yields on bank profits. The article presents the dilemma: on one hand, high interest rates may increase profits from loans, especially if the interest rates banks charge customers rise faster than the interest they pay on deposits. On the other hand, high interest rates make credit more expensive for households and businesses, which could reduce demand for loans and increase the risk of default. The KBWB ETF, which tracks US bank stocks, has yielded a return of nearly 20% over the past year, but has shown significant weakness in recent weeks, which may indicate investor concern. The article concludes by clarifying that its content does not constitute investment advice.