JPMorgan lifts American Express rating as sector faces geopolitical headwinds

Investing.com -- JPMorgan has upgraded American Express to Overweight as part of its second-quarter consumer finance preview, even as the bank struck a cautious tone on the broader sector amid renewed U.S.-Iran conflict and a deteriorating macro backdrop.

American Express shares are up approximately 1% in premarket trading on Monday.

Analyst Richard Shane said the "pause, not peace" dynamic from the first quarter has re-emerged, with the 60-day U.S.-Iran memorandum of understanding signed on 18 June having broken down after President Trump declared the ceasefire "over" in early July following renewed strikes.

Shane said "the risk of further escalation is elevated," reintroducing the prospect of an energy price spike that "would squeeze lower- and middle-income consumers most acutely."

The analyst highlighted two additional forces that compound the geopolitical risk. First, the labor market is "cooling rather than improving," with June nonfarm payrolls rising just 57,000 and the unemployment rate's decline to 4.2% driven "largely by falling participation rather than strong hiring."

Second, the rates outlook has shifted hawkish, with mortgage rates backing up to approximately 6.5% following the conflict's resumption, creating a persistent headwind to refinance activity.

Against this backdrop, Shane said "selectivity and discipline remain paramount across our coverage," with JPMorgan leaving all other ratings in its consumer finance coverage unchanged while establishing 2027 price targets across the group.

JPMorgan continues to believe "the full impact of these geopolitical and macro shocks on the real economy has yet to be realized."

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