Credit Card Rate Cap Undermines Bank ETFs After Year of Strong Growth

Core Viewpoint - President Trump's remarks about capping credit card interest rates at 10% have created uncertainty in the banking sector, leading to declines in bank stocks and financial-sector ETFs [1][2]. Group 1: Impact on Financial Sector - Major credit card issuers experienced significant stock declines, with Capital One down over 10%, Citigroup down 5%, JPMorgan Chase down 6%, American Express down 7%, and Bank of America down 4% over five days [4]. - The Invesco KBW Bank ETF (KBWB) slid 3% over five days, despite returning over 32% in 2025, which was more than double the 15% return of the S&P 500 Financials Index [4]. - The Financial Select Sector SPDR ETF (XLF) dropped 4% after a 15% gain in 2025, while Vanguard's Financials ETF (VFH) declined 3% after a 15% climb last year [6]. Group 2: Legislative Context and Market Reactions - There is skepticism regarding the feasibility of implementing a credit card interest rate cap without Congressional approval, raising questions about the actual threat to banks [2][5]. - The pressure from the White House on the Federal Reserve and proposals to limit financial institutions' investments in single-family homes are contributing to market volatility and the need for diversification among financial services holdings [5].