Big US banks’ earnings can provide some insight into the likelihood of a recession, as they reflect broader economic trends. Banks are sensitive to changes in consumer spending, loan demand, and credit quality, which often signal economic health. For instance, increases in loan loss provisions, declining loan growth, or weaker consumer confidence reflected in earnings reports could suggest banks are bracing for tougher times. Commentary from bank executives during earnings calls might also highlight concerns about tariffs, inflation, or slowing growth, offering a window into their expectations for the economy.

That said, bank earnings aren’t a crystal ball. They’re a lagging indicator, meaning they reflect what’s already happened rather than predict the future with certainty. Economic uncertainty, particularly around tariffs, complicates the picture. Tariffs could raise costs for consumers and businesses, potentially reducing spending and loan demand while increasing defaults—bad news for banks. On the flip side, banks could benefit if tariffs lead to higher interest rates or spur domestic investment, boosting lending.

As for whether banking is a good sector to invest in right now, it’s a mixed bag. The sector’s been volatile, with stock prices reacting sharply to tariff news and recession fears. Banks like JPMorgan, Citigroup, and Wells Fargo are fundamentally strong, with diversified revenue streams, but they’re not immune to economic slowdowns. If you’re considering investing, the sector’s appeal depends on your risk tolerance and time horizon. In uncertain times, banks can offer value—trading at lower valuations than tech, for example—but they’re exposed to macroeconomic headwinds. A recession would likely hit loan portfolios and investment banking revenue hard, while prolonged uncertainty could keep stocks under pressure.