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NEW YORK (Reuters) – Wall Street’s biggest banks sounded a note of caution over the year ahead on Thursday, citing high inflation, credit concerns and the possibility of less asset appreciation, even though investment banking pipelines and loan growth remain healthy.

Banks reported a mixed bag of earnings last month with some disappointments as trading revenue fell in the fourth quarter after markets normalized and the Federal Reserve scaled back its asset purchases. They are now grappling with high inflation and a Federal Reserve that is looking to raise rates more aggressively.

Several top executives updated on market conditions at the Credit Suisse (SIX:CSGN) Financial Services Forum in Florida, coming about a month after they reported fourth-quarter earnings.

“We’re moving from an environment of very easy money and below trend inflation to an environment of tighter money and above trend inflation. The economic environment is different and there will be consequences to that,” said Goldman Sachs (NYSE:GS) Chief Executive Officer David Solomon.

High inflation is worrisome enough that Bank of America (NYSE:BAC) Chief Executive Officer Brian Moynihan said that his bank has stress tested its portfolio for the possibility that Fed policymakers are not able to control inflation and that the economy enters a recession.

“We have to run those scenarios,” Moynihan said. “What will hurt the industry generally will be if they have to create a recession. And that’s not their goal for sure. They’ll hopefully do a great job handling it. We stress test that and we’re fine.”

Mike Santomassimo, chief financial officer at Wells Fargo (NYSE:WFC) & Co, the fourth-largest U.S. bank, noted that credit spreads had been widening and “that’s an area to watch to see if there are any cracks that start to emerge”.

“Inflation has the risk of being a real headwind for growth. That’s one of the uncertainties,” Solomon said. “No one really knows how we’re going to navigate from a monetary policy perspective to rebalance inflation. That’s an unknown.”

High inflation and expectations of more aggressive rate hikes from the Fed have whipsawed markets this year, sending the S&P 500 down 7% year-to-date while bond yields have jumped and the yield curve flattened.

Shares of Goldman, Bank of America and Wells Fargo were all down more than 2%, underperforming the broader market Thursday. The S&P 500 was down 1.3% mid-morning.

Solomon said that “everybody is used to asset appreciation and we might have a period of time where there’s less asset appreciation.”

Trading activity was not as high as in 2021 but was “still pretty active” while M&A activity so far was “pretty high,” he said. Still, there would be less equity issuance this year, he added.

Bank of America’s Moynihan had a similar tone as he said the bank’s capital markets business “is down” so far in 2022, even as the investment bank continues to see a strong pipeline of customer activity.

Wells’ Santomassimo noted that while the portfolio in consumer and real estate for the most part continues to perform, “in the auto space, which is a pretty small portfolio in the scheme of the balance sheet, on the bottom end of the auto book, maybe you see a little bit of noise there.”

However, he said that rising rates would help the bank’s ultimate goal to reach a 15% return on tangible equity. When interest rates are higher, banks make more money by taking advantage of the difference between the interest banks pay to customers and the interest they can earn by investing.

“The question will be where rates go and then what impact that has on the economy and the environment we’re in,” Santomassimo said.