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Equities have been climbing steadily so far in 2019. But despite the overall positive mood in the markets, fears over a deceleration in economic activity, rising interest rates and the diminishing impact of the U.S. tax cuts on corporate earnings growth still linger.

Investment experts with a respectable track record have even discussed the possibility of a recession kicking off as early as next year, with stock prices potentially reflecting the anticipated economic struggles later in 2019.

Should macro-level concerns prove justified, investors who hold stocks of well-established, higher-quality companies might weather the turbulence better than others. Along these lines, JPMorgan Chase (JPM - Get Report) presents itself as a solid play in the financial services sector. 

Fundamentals Begin To Tell The Story

The case for investing in JPMorgan starts with solid fundamentals. The company combined its sector-leading managed revenues of $112 billion in 2018 with an industry-low overhead ratio of 57% to produce a ROTCE (return on tangible common shareholder's equity) of 17% that is best in class. The result has been a trailing 10-year EPS annual growth rate of 21% that no other bank has been able to match.

Analysts for Jim Cramer's Action Alerts Plus portfolio, which owns JPMorgan, take a similar view. "We view JPMorgan as the best of breed large cap financial," they write. "The firm consistently delivers the best return on equity/tangible common equity performance in the industry, making the stock well deserving of a premium to its growing tangible book value."

Although next year's earnings are expected to grow a much less impressive 8%, in part driven by the drop off in year-over-year tax benefits, JPMorgan still looks positioned to execute well in the foreseeable future.

Also worth noting is the robustness of the bank's balance sheet. JPMorgan has been growing its loan assets at a controlled pace, which might bode ill for the top line on the consumer and commercial sides of the business in the near term. But the company reinforced its focus on growing high-quality loans during its most recent Investor Day event in February. As a result, the slower revenue increase should be countered by lower exposure to credit losses, the net effect of which could be a positive for the bottom line.

Analysts for Jim Cramer's Action Alerts Plus portfolio, which owns JPMorgan, take a similar view. "We view JPMorgan as the best of breed large cap financial," they write. "The firm consistently delivers the best return on equity/tangible common equity performance in the industry, making the stock well deserving of a premium to its growing tangible book value."

A Relative Safe Haven

As the old saying goes: history does not always repeat itself, but it often rhymes. So it is important to understand how safe the market has perceived JPMorgan stock to be compared to its peer group.

Over the past 12 months, a turbulent period that included a correction in March 2018 and a bear market in the fourth quarter, the financial services sector (XLF - Get Report)  fell 5%, trailing the performance of the S&P 500 (SPY - Get Report) by about 10 percentage points. JPMorgan shares moved roughly in line with the industry in absolute return terms, but with an important difference: they did not endure the same ups and downs as other players in the sector did.

Take Citigroup (C - Get Report) and Bank of America (BAC - Get Report) , for example. While these two stocks produced volatility of between 24% and 25% since March 2018, representing one annualized standard deviation from their average returns, JPMorgan experienced volatility of only about 20%. Through the Christmas holiday trough, Citigroup saw nearly one-third of its equity value evaporate since the September 2018 highs. Meanwhile, JPMorgan's much more manageable 19% drop may have allowed shareholders to sleep a bit better at night during the broad market unravel.

The key takeaway is that, historically, investors seem to have found in JPMorgan stock a relative safe haven in the financial services sector. Should macroeconomic factors begin to deteriorate over the next several months, it's plausible that JPMorgan could once again fare better than its banking peers.

In Conclusion

Investing in JPMorgan shares is not a move intended to beat the broader market during an economic downturn. In fact, studies suggest that banking is a primarily pro-cyclical sector that should produce better returns in an environment of economic expansion and accumulation of debt in the private sector.

But within the context of a diversified portfolio made up of buy-and-hold stocks, JPMorgan is likely to continue being a high-quality name positioned to grow long term, with less downside risk.

JPMorgan and Citi are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells JPM or C? Learn more now.

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The author has no positions in any stocks mentioned in this article.