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The Penta Podcast Channel is home to all of Penta's podcasts, including the Macrocast and What's At Stake: A Penta Podcast. The Macrocast, produced by Penta and Markets Policy Partners, features weekly insight and analysis on the latest macroeconomic trends. What's at Stake: a Penta Podcast features in-house experts and often special guests for analysis on the biggest issues shaping business and public policy.
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Is everyone investing now? A look inside with JPMorganChase Institute
This week on What's at Stake, hosts Bryan DeAngelis and Ylan Mui talk to Chris Wheat, President of the JPMorganChase Institute, about how the pandemic has transformed America's economy. Chris breaks down recent Institute research on how a wave of new investors—particularly younger and lower-income individuals—are taking bigger risks through behaviors like dip-buying and returns-chasing. At the same time, while many households saw their savings increase during the pandemic, those cash reserves are now starting to dwindle, impacting financial health across the board.
So, what does this all mean for the economy? Chris explains how the Institute's use of real-time, anonymized data from millions of JPMorganChase customers helps policymakers stay informed and make smarter decisions. Plus, he teases an upcoming Institute report on the booming small business sector.
Read the latest retail investing reports here: JPMorganChase Retail Investing Reports and tune in to the full episode here.
Welcome to this week's episode of what's at Stake. We're your hosts. Brian DeAngelis, partner and head of the DC office here at Penta.
Speaker 2:And I'm Ilan Mui, Managing Director at Penta.
Speaker 1:And we're joined today by special guest Chris Wheat, president of the JPMorgan Chase Institute. The Institute's recent work has focused on helping business leaders and policymakers understand the state of household financial health, small business formation trends and changes to local economies in the wake of the economic disruptions we saw during the COVID-19 pandemic. Chris's work has been cited by federal and local policymakers, covered by major national and local media outlets, and together we're going to be taking a closer look at some of the most recent reports from the Institute, examining why some of these key insights are so important to understanding household financial health and how the Institute's set of research is helping to paint a broader picture of the economy. So, chris, with that welcome to the show.
Speaker 3:Thank you, thank you, brian, thank you.
Speaker 1:Let's jump right into it. We'd love to hear more about the Institute and your background, so can you start just giving us an overview of your work there? What type of research you all produce? What are you and your team trying to accomplish with the work you do?
Speaker 3:And again, thanks so much for having me so and your team trying to accomplish with the work you're doing. Sure, and again thanks so much for having me so the incident we were just sort of talking about that before we got on. We've been around for coming upon 10 years, and the theory of the case at the time and even now, is that being a bank gives you access to these wonderful, tremendous data on the financial experiences of households and small businesses in a way that's not always accessible to policymakers and decision makers out in the world, and so mostly what we do is try to engage with that data, mine it for insights and use it to help people understand what's happening largely with the US economy in a relatively I don't want to quite say real time, but like low latency, like a reasonably up-to-date point of view on sort of what's happening with the economy. That's great.
Speaker 2:And you say that you're able to do this using some of the proprietary data that the bank collects. But just to be clear here, this is not people's personal financial information. You're able to study it in an aggregate way in order to uncover these insights, that's right.
Speaker 3:I mean, for the kinds of questions that we're trying to ask, it doesn't really help to know what my mom right like, what her data specifically is, because that's not really what we're trying to do. So the data that comes to us is de-identified, so we don't see things like names and addresses and stuff like that. But the way that we analyze it exactly to your point, we're trying to say in aggregate, like what is happening with this particular group maybe, or maybe this area of the country, but certainly not really looking at individual people, because that's not really what's most helpful to the people that we're trying to engage with.
Speaker 1:That's policymakers and other decision makers who really are operating at a more aggregate level than that. But it is the trends in that data that you're trying to find and you've mentioned in the intro. You've been around for 10 years. I feel like a lot's changed in 10 years between technology, ai, covid, even your last couple of pieces on retail investing. That's big changes, especially during the pandemic when everyone was stuck at home and we can get in a GameStop and other kind of fun things. But everybody sort of flooded to this new way or not new way of investing, but new for them. So you did a couple reports on that. Tell me a little bit about your finding from that series and what trends you're seeing coming out of that. Right, that's right.
Speaker 3:So we've done a handful of reports looking recently at retail investing. We've done some before that too, but have really focused on that a lot in the last 12 months or so. Probably the most important takeaway maybe I'll try to squeeze two into one thing.
Speaker 1:Sure, yeah, please.
Speaker 3:Most important takeaway maybe I'll try to squeeze two into one.
Speaker 3:Thing is really, as you kind of alluded to, there has been a market increase in the number of people who are engaging in retail investing. So for us that looks like we see money flowing out of their account into an investment account and it's not necessarily one of ours, right, but we can kind of see from the data oh, here is a person who at least appears to be putting money into an account of account where they have a lot more control over the investments that they make and, you know, it's not necessarily being managed by somebody else. That used to be a relatively narrow set of people, but we've seen huge increases where, you know, even among higher income people who did more of this in the past, it's like double maybe, like recently, as compared to the mid-2010s. And then for, like, low-income investors and other like subgroups, like an even bigger increase, like maybe four times as much or something like that. So like very, very big increases in the number of people who are engaging in that way.
Speaker 3:And then a bunch of stuff, sort of downstream of that like okay, so now these people are in the market in a different way. They're making decisions. Well, like, what kind of decisions are they making? What are their portfolios look like? And we've seen a lot of changes there in terms of different kinds of investments, shifts in sort of the risk portfolio.
Speaker 1:Especially among younger, newer investors. I think it's a lot of men doing this, but you're even seeing trends around dip buying and returns chasing. How is that impacting kind of markets overall?
Speaker 3:Right. I mean, one way to look at that is it's not so much how it's impacting markets, but just when policymakers are trying to think about the relationship between what's happening in the market and what's happening in household finance.
Speaker 2:Well, I mean, your question is a good question too.
Speaker 3:I'll try to answer that one too.
Speaker 3:With that many more people exposed and with a different relationship between sort of what's happening in the market and what's happening in their accounts, that kind of at least, can give you a little bit of a lens on if we do this kind of policy of change or if we kind of manage rates in this way.
Speaker 3:Like what is that going to mean for a typical family? It used to only be affecting a smaller number of families and kind of a narrower subset, and now it's like quite a bit more broad. So there's a high-level takeaway there In terms of the markets itself. Right, it is giving us a little bit more of a sense of some of those dynamics around. Uh, what happens when there's a uh, when the market is slowly trending up, like who's coming in and sort of you know some of that hurting behavior that change a little that dynamic. You're seeing that. But so too, on that like when everything turns around and you have one of those uh down days like there are two you see a little bit more on the receiving end of those trades. Like there are different dynamics that are being influenced by having this many more people in the market in such a different way.
Speaker 2:So just to clarify, you're seeing both more people invest in the markets across income and demographic groups. Are you also seeing those people invest more than perhaps they used to? So more people and more money, or is it just a broader base?
Speaker 3:It's both an additional set of dynamics around sort of how responsive are they to other things going on in their lives in terms of, like, when do they put more money in we can sort of better understand because we can see these different kinds of things in our data. We can both see, for instance, what's happening with your income at the same time as what's happening in your investments. So we can start to like unpack some of those dynamics. And in addition to that, elon, we can see like and this is what's the focus of the most recent piece what's happening with the risk, if you want to think about the kinds of things that they're investing in, like how much do they'll swing with the market versus not, and so all of those things have been changing.
Speaker 2:So are people more or less risk averse than they used to be, or investors.
Speaker 3:Well, when we see the money landing in their accounts, we see it invested in assets that are more risky, in the sense that they swing more with the market, and I always feel like I want to not so much qualify but at least define. When we talk about risk which is a thing we have been talking about, because we now have this perspective that we didn't before and we definitely see risk levels going up. But what does that mean? It's index fund flavored risk right Got it Like when we say more, it goes-.
Speaker 2:It's not all Dogecoin. Or you know, right, right, like when we say more, it goes not all Dogecoin.
Speaker 3:or you know it's like you know like slightly more swingy than the S&P 500 or something like that, and that is more than we saw before. There was a material shift. You see it more in newer investors than people who have been in the market for a longer period of time, as you mentioned, the sort of the younger investors and the men too, but like that's kind of the the range of risk that we're seeing.
Speaker 1:I've been curious for a while. You mentioned Dogecoin, but how much of this group, if you've looked at this at all, is chasing a brand or a narrative versus chasing, kind of maybe, the fundamentals, like I don't see General Electric? Or Disney get really buzzy. But you do start to see like NVIDIA or Uber or Nike make a ton of headlines Like which one is the cart, which one is the horse? Is it both?
Speaker 3:Well, we haven't been really tracing individual equities like that. But again, that's part of why I was trying to get some color to like at least the typical levels of sort of measuring in terms of the beta right of. You know, we're sort of measuring in terms of the beta right, so like it really is closer to, like I said, it's more like a little bit more swingy than the index. It's not the kind of thing that's getting pushed around by things that themselves are moving around a lot more than the market. So we've seen like any direct evidence that there's like wild concentration into a few things that are really sort of spiky. A couple of years ago we had done some work looking at crypto specifically, where the patterns again sort of look generally similar. We see more people coming in with some similar kind of demographic cuts on it as one lens into that kind of thing.
Speaker 1:Yeah, I'm curious how are you seeing, are you also looking at, kind of, I guess, the performance or how is this benefiting different demographic groups? Is it more helpful for lower income folks gaining more access, more money this way, building up?
Speaker 3:wealth, taking many, many steps back. Um, uh, very common advice like people should uh try to invest early in their lives and if you have the kind of timeframe uh to withstand, kind of like short term up and down, like that's kind of a a kind of standard piece of financial advice. I don't think I'm saying anything novel to say that, but when you kind of cross that with who is participating and how is your participation changing, you could at least start to see the possibility of a broader subset of people being able to benefit from overall longer term market gains, and I think that that's important.
Speaker 1:Yeah, that's very helpful, yeah.
Speaker 2:And I think this is related too, because you know one of the things that we talked about so much. You know, especially immediately after COVID hit and we saw so much fiscal stimulus go out and as well as people starting to save money because they just weren't living their lives in the same way that they were. Guess, with that extra income or that extra money, is there a connection between sort of the rise of retail investing that you're talking about, as well as you know the really healthy household balance sheets that we've seen over the past few years?
Speaker 3:Right, and it's a little bit hard to unpack because, as you note and as we see in other research, that we've done, right in aggregate, a huge move in household balance sheets, even at sort of the median right, sort of the typical family, and across any kind of way that we could cut it by raise, by income, age, anything we could cut, you see, that kind of within family.
Speaker 3:How much cash was there sitting in your account, like right in the early months of the pandemic, like spiked? And then there is federal programs and then there was spikes after those, and I think that's the way that one would expect. So all of that happened. The trend that we see in terms of retail investing does predate that a little bit, though. So there's other things that are happening at the same time, right, like the cost of investing in retail platforms is coming down at the same time too. So there's a little bit of a both and and then maybe some more things, but I do think that it's hard to dismiss the possibility that having more cash, maybe also having more time, had something to do with some of that increase in participation.
Speaker 2:I will say just very anecdotally I know that we're talking aggregates and not individuals here, but I was talking to a mom group at an event with my kids and we started talking about crypto investing and we had the whole conversation at our kids' sporting event get-together. It was all about retail investing, essentially, and I walked away from that and I thought this was so unexpected. But given the trends that we're seeing, perhaps maybe I shouldn't have been so surprised.
Speaker 3:That's right, there's a lot. There's a lot more people involved. There's more people involved. It's going to be more in your you know, uh, in the conversations you're having with friends and stuff like that, and so, right, I really think that that's got to be part of the, the mechanism through which some of these things are spreading.
Speaker 1:Yeah, there seems to have been a stickiness to it, where I had those first conversations you, you know probably in 2020, bumping into a neighbor, maybe from 10 feet away or something, and now we're still approaching it, it doesn't seem like it was just a fad for COVID.
Speaker 1:People stuck with it and found an interest in it and even built some real wealth around it. I want to take a step back though, because you guys look at a lot of insights beyond just kind of retail investing and you look at many different aspects of how households are financially healthy or hopefully they're healthy and not unhealthy. You seeing as some of the big drivers across kind of household financial health that either happening now or that we should be paying attention to maybe coming around the corner.
Speaker 3:I mean, you suggested some of them and like one of the reasons that we kept looking at this, particularly like these time series, was like the big changes in the economy and sort of big changes in like our people at home or not, and that's like one of the drivers for tracking on a regular basis like well, no, but, but seriously, what happened the last three months, what happened in the three months since? And um, that has been a really big driver and uncertainty, uh, and then those things kind of, I want to say, fed on themselves but created a new set of things to track. Uh, lots of, uh cash landed on household balance sheets and then like, well, how are we going to spend that? And so, like you kind of want to understand that prices went up. This is not news in this podcast.
Speaker 3:So prices went up and then like lots of questions about sort of like well, how is that sort of governing what's happening in terms of people's overall financial health? Well, how is that sort of governing what's happening in terms of people's overall financial health? Then, what's happening with wages? We have a lens on wages. Like, we don't see, you know, dollar for dollar, wages, but we certainly see the money that's coming into people's account. That looks like income. Okay, well, what's happening with that? How does that relate to prices? Like, can people buy as much or less, like you know? So we can give you a little bit of a lens on that. So all of those things, those dynamics, are things that we can sort of understand, pay attention to. Sometimes we're just describing what the overall trends are. Sometimes we can look at a particular policy. You know CTC, payment lands.
Speaker 2:How do people spend it? Do they spend it Child tax credit you're talking about?
Speaker 3:Sorry child tax. Thank you, it's in my head as CTC and it's burned that way forever, I'm sure.
Speaker 2:I think of CTC as Cinnamon Toast Crunch, so you're already one step ahead of me. It's also a natural cereal. It's also a natural cereal.
Speaker 3:But those are the kinds of ways that we're trying to make sense. You know we hope to roll these things up into an overall sense of the economy, but part of the really cool thing about the data that we have is it can let us look at each of these pieces and how they interact together to keep putting bricks in the sort of the building of the bigger story.
Speaker 1:Yeah, can I press you on anything you're seeing there as those pieces come together? I mean, we've seen, presumably, inflation drop off a little bit over the last few months. We had our first rate cut. Maybe it's too soon for that, but are you seeing a shift at all?
Speaker 3:Right, well, I mean in the past year or a couple of years anyway, there have been a couple of things that we've seen, so maybe the directionally more obvious one is we've seen the balances come down right, like that's something that's almost bound to happen.
Speaker 3:And then some question about like, what would happen as they came down and how long would they come down. So they have been trending down and that's something we've been paying attention to recently. Like our lens on, like how much money is in your bank account, is a little bit different, because we try to tell a story about, like what's happening to individual families that we're looking like over time, as opposed to the whole distribution.
Speaker 1:Right.
Speaker 3:When you look at individual families, they often gain money in their accounts. People are getting older, like all those things happen. So yes, we see those continuing to be higher than they were before. Happen.
Speaker 3:So, yes, we see those continuing to be higher than they were before, but once you control for things like inflation a little bit to your point and for this kind of natural growth they have, they are. It is not obvious that they are well above trend anymore, right, Like in some sense that's kind of. One thing that has recently happened is we've seen those kind of coming in line, or maybe not above historical trends, with lots of different things happening about cash balances, but that's kind of one piece of that. That's been recent Our lens on income that has grown more than inflation. So we still see like kind of real incomes, like inflation-adjusted incomes, Like they're outpacing within a family, within a person, inflation, but maybe not as much as you might expect, especially for certain groups of people, Because again, we're like following people over time and, you know, as you get older and lots of people like seeing income growth within there. So it's like relative to expectations, you know, not down, but now is a word that was formally tossed around the team for sure that's been focusing on it.
Speaker 3:So those two pieces like kind of both of like you know, there's growth but it's not like on fire, like wild growth. Like on fire, like wild growth. We haven't recently looked at spending but looking at other sources on spending, spending remains strong there right From every measure that we can see.
Speaker 3:We're trying to understand what we see there and it's possible. There's like lots of ways that you get there, but like that's the one piece where certainly external data and what you can see, you know, in the performance of the firms that serve, you know, retail customers, it seems to be strong, so like a little bit TBD, of what that exactly means.
Speaker 2:Yeah, we keep waiting for that to slow down and I feel like a lot of that on this podcast and it never happened which kind of brings me to the question that I was hoping to ask. Brian mentioned, you know, the Fed rate cut and I know that the risk of recession seems low at this point. But as you look ahead to either soft landing, no landing or crash landing, are there any things in the data that you're watching out for that could potentially signal hey, we might be reaching some type of inflection point or we need to pay attention? This is the canary in the coal mine.
Speaker 3:Well, we don't usually, we certainly don't predict things like this. But like, fair enough question right. Like one of the reasons that we've been monitoring these things is I have a lot of empathy for the Fed because they have this really hard task of like trying to keep things sort of balanced and kind of proceeding in.
Speaker 3:I don't want to say an orderly way but like without like, and kind of proceeding in I don't want to say an orderly way, but without big swings and shifts that then you have to use different kind of instruments to try to get a hold of, and everything we have seen thus far. We haven't really seen this like things are moving along slowly and, oh, all of a sudden they fell off a cliff or something they like shot through a baseline that you weren't expecting them to shoot through, and so I think if anybody sees things like that, those are the things that make you worry that this task that is already hard has just gotten a lot harder, where you might not be as able to manage something like kind of a soft landing, and so that's presumably why all of us are looking to see if there's any of those kind of like unexpected turns or something that will be especially hard to manage.
Speaker 2:Yeah, sounds like the data, then, that you're seeing seems to give you confidence that that soft landing is.
Speaker 3:We certainly haven't seen anything that's like well, this is the thing that's kind of like tip the apple cart, so to speak.
Speaker 1:Maybe to kind of wrap up with a final segment, if you will. But next year is going to be a huge economic year in the sense of, yes, let's see if the soft landing comes, more rate cuts. But then we have the big tax reform debate and I guess, depending on who wins, in November we could have a tariff debate, we could have a tax reform debate. If I'm a policymaker, how can I use your data and research as I'm sorting through all of that for the next 12, 15 months?
Speaker 3:No, it's a great question and we want to be a partner to people who are trying to understand what's happening.
Speaker 3:It's why we report on things like you know, this thing just changed in the world, like what happened to incomes, what's happening to balances To the extent that we can have a perspective on spending, what's happening to small businesses. That hasn't really been the focus of this conversation, but we have a book of work against that. We're starting to look at other larger businesses. I think all of those can be places where the kinds of granular insights that we have, that we can drive down to an industry or a part of the country or like an age segment or something like that, can really help policymakers who are delivering policies, that kind of ride, those lines that are targeted in one way or another or maybe not targeted in the ways that they could have been like understand what the implications of those choices were, and we hope that by having again, like a relatively up-to-date empirical point of view on it, that that's a way that we can help and help shape those conversations.
Speaker 2:Yeah, can I just underscore, though underscore the point you just made around up to date and I think you said at the very beginning of our conversation, the idea of low latency data. Can you just talk about why that is important? Because I feel like our economy now moves so fast and sometimes it feels like the data doesn't keep up with it, and certainly for policymakers that is a challenge. What is the phrase? Policymaking by looking in the rearview mirror? Rather than looking forward, so tell me about the importance of having data that is current.
Speaker 3:Right, if you wait too long. You kind of ask this question about sort of like trying to manage the macro economy, and of course it doesn't like that fast, but the longer that window gets, the higher the risk is that you've kind of missed the moment to make an intervention. Or if you're trying to tune something, as you're sort of really bring policy forth that's going to be responsive to what's happening in the economy and not get things like too far out of line such that it's really really hard to bring back, and so we are lucky to have data that we can wrangle. Thank you to many, many people on the team for like helping to get the data in a little faster and finding ways to analyze it and make sense of the things that don't make sense and write about it and make sure I'm trying to like I'm listing all these people that we're thinking that it is compliant and all the stuff right Because, like that's, that's one of the value propositions relative to other data sources.
Speaker 1:Can I, before we wrap up, I do? You raised a good question. I want to go back to it how, how are small businesses doing? We talk about them so much in Washington I think we get caught up in election years of individuals and how people are going to vote but such a huge backbone of our economy. We talk about them a lot in our day-to-day work. What does it look like out there for?
Speaker 3:small businesses. It is a super interesting question. As of the time that we are recording this, I think we are like one day ahead of releasing a new piece.
Speaker 1:You can give us a scoop, I know.
Speaker 2:Well, I'll give you the setup and the trailer right now.
Speaker 3:So like one of the kind of surprising things I think, certainly to me and to, I believe, a lot of observers, certainly folks inside and outside the bank early on in the recession, was that there was like a huge uptick in the number of small businesses that were founded.
Speaker 3:Sure yeah, right, and lots of speculation, lots of good research to figure out, like, what's happening with those businesses. Are they like businesses that are going to contribute to the economy, are they going to grow, or are they like one-off businesses that people were forming in some sort of response to, you know, other conditions in the pandemic, right? And so stay tuned because, like that's part of what we want to sort of lean into with the next report. We have this again, this advantage of not only having data that's relatively recent, but also you can see businesses and households for very long periods of time. You can see other things that are happening around the business owner, to get a sense of like which of these businesses were, which kind and like what are their financial outcomes been since then. So, but the I mean, I feel like I thought a lot about small businesses. I was wildly surprised to see, like, how much activity there has been and how sustained like there's been, like basically a level shift, and it hasn't retreated. I was just kind of looking back at the data.
Speaker 1:Yeah, that's interesting, a good level shift and it hasn't retreated.
Speaker 3:I was just kind of looking back at the data last week and it's still up like relative to you know, like the pre-pandemic trends, and so that's been like a really interesting development.
Speaker 1:Yeah, You've heard so much about side hustles and creator economy, but I think for a lot of people and we've talked about this in the context of tax reform this is turning into their main job or their small business, or they're starting to see it grow, and it's an interesting new world for them.
Speaker 3:For those of us who now shop on Instagram, that's right and, like you said, for policy right, because there's sort of policy that takes certain kind of structures for granted. Tax policy is sort of aligned in a certain way with an expectation about the kind of business that it's going to apply to, and then things change and you kind of understand what that would mean.
Speaker 1:Yeah well, fascinating. Let's leave it there, but I'm going to put a plug in for everyone to read that new report when it comes out, and we'll include it in our notes as well. But, chris, fascinating conversation. Thanks so much for coming on this week.
Speaker 3:Thank you guys so much. It's really great to talk to you both.
Speaker 1:And to all our listeners, remember to like and subscribe, wherever you listen to your podcasts, follow us on Twitter, at PentaGRP, and on LinkedIn at PentaGroup. I'm your host, brian, and, as always, thanks for listening to what's at State.