American banks are shining… and the economy is waiting for the bubble to burst

Major American banks continue to have a strong presence in the global financial markets, amid mixed indicators that reflect a mixture of confidence and caution at the same time. At a time when Wall Street is witnessing remarkable activity and a gradual return to deals and investments, attention is turning to the third quarter results, which restore momentum to the banking sector after a period of slowness and uncertainty.
Recent movements in the market indicate a state of measured optimism, driven by hopes for an economic recovery and continued flexibility in American consumer spending, but behind this apparent prosperity, questions are rising about the sustainability of this growth, especially in light of the rising levels of debt and the tightening of monetary policies over the past two years.
Experts and analysts are preparing to closely monitor the next stage, as strong bank performance indicators coincide with fears of a potential financial bubble that may reshape the global economic landscape.
Between record profits and increasing warnings, Wall Street appears to be entering a delicate phase that requires careful reading of what is behind the numbers.
Goldman Sachs, JP Morgan Chase and Citigroup reported huge profits across their Wall Street divisions, despite warning that investor enthusiasm could push the recent rally in financial markets into bubble territory, according to a report by the Financial Times.
Bankers expected that the US administration’s liberal stance on regulatory restrictions and low interest rates would pave the way for a stream of deals after a break that lasted more than two years. However, this was not achieved in the first months of the year, as companies had difficulty understanding the impact of the trade wars launched by the administration on growth and profit expectations, according to the newspaper.
The banks indicated Tuesday that they now expect gains in their Wall Street businesses to continue for the rest of this year and into 2026.
But in a related context, the head of the global markets department at Cedra Markets confirms to the website: "Economy Sky News Arabia" There are real fears of a credit bubble whose features are beginning to become clear in the American markets, explaining that many major banks have touched on this issue over the past few days, especially with the statements of Jamie Dimon, CEO of JPMorgan, who warned of rising debt levels.
Yaraq points out that the recent period has witnessed a continuing remarkable rise in interest rates, which has led to an increase in defaults on whether individual credit cards or corporate debts, which reflects a clear state of pressure on the American financial system.
He adds that the US Federal Reserve may move to reduce interest rates by 50 basis points during the current year, followed by a similar step in 2026, which would give some temporary relief to the credit sector. Joe Yark continues, saying that American investment banks have already begun to build additional allocations in anticipation of potential losses resulting from a rise in payment defaults, whether in the medium or long term, an indication that the banking sector is dealing with the next stage with great caution..
He stresses that any economic slowdown or shock in the United States may have serious negative repercussions on companies, individuals, and economic growth in general, especially in light of American household debt reaching more than two trillion dollars and interest rates on corporate debt rising at a worrying rate.
Yarak concludes his talk by emphasizing that "The sooner the US Federal Reserve lowers interest rates, the less severe the bursting of the credit bubble may be, but it cannot be denied that the US economy is facing a sensitive challenge that requires careful and balanced management of interest and debt during the next stage.".
On the other hand, other reports show greater optimism about continued momentum in the banking sector. A report indicates: "Reuters" Senior US bankers expect business to continue to boom with stock markets rising during the last quarter of the year and the economy and consumer spending holding up despite comprehensive tariffs, but some have warned that asset prices may be unsustainably high.
Consumer finances remain healthy, with JPMorgan noting that consumer default rates are trending below expectations, though executives said they are monitoring any deterioration with weak labor market data.
As Jane Fraser, CEO of Citigroup, said during a conference call: "The macroeconomic environment reflects a global economy that has proven more resilient than many expected. The United States remains a leader in this area, driven by continued consumer spending, as well as technology investments".
Mike Santomassimo, Wells Fargo’s chief financial officer, told reporters that the deals on offer look good. JPMorgan’s counterpart, Jeremy Barnum, said the bank had its most active summer of mergers and acquisitions in a long time, and that capital markets and IPO conditions were also strong at the start of the fourth quarter.
For his part, financial markets expert Muhammad Saeed confirms to the website "Economy Sky News Arabia" On the face of it, the earnings results of American banks for the third quarter of 2025 appear excellent and very impressive, at a time when major banks such as JP Morgan, Goldman Sachs, and Citigroup achieved strong profits that exceeded analysts’ expectations, driven by a remarkable recovery in investment banking activities.
Saeed adds that this recovery was clearly evident in the increase in fees for mergers and acquisitions and initial offerings, in addition to record trading revenues that reflected a high appetite for risks in the financial markets. But he explains, on the other hand, that the whole picture is not as rosy as it seems at first glance, because… "The real story"he says, lies beneath the surface, where the CEOs of these banks themselves warn of a wave "Investment fever" They may be exaggerating, indicating that the prices of some assets have already entered bubble territory.
Saeed continues that this means that current profits may be the result of huge liquidity that has pushed prices to unsustainable levels, which may pave the way for great future risks. He confirms that the warning is from "Credit bubble" It reflects growing concern about the alarming accumulation of debt, especially in less regulated sectors such as private credit.
He points out that warning signs have already begun to appear, especially in high-risk car loans.
Although consumer spending remains strong and default rates are lower than expected so far, banks have begun to take clear precautionary measures.
Saeed adds that the most prominent evidence of this caution is the banks’ increase in provisions for credit losses, explaining that this step means that banking institutions expect a decline in the quality of loans during the coming period, especially with the slowdown in economic growth and potential pressures on low- and middle-income borrowers and the commercial real estate sector.
Financial markets expert Muhammad Saeed concludes his speech by saying that the earnings results so far reflect a double scene. On the one hand, there is clear current strength in the American banking sector driven by high investment activity and an economy that is still flexible, but on the other hand, worrying indicators are emerging that this strength may be temporary, and that the American economy may be approaching a dangerous brink, as any sharp correction in asset prices may lead to the bursting of a bubble. Credit.