President Trump this week criticized credit card issuers, pledging his administration would prevent consumers from being "ripped off" by high interest rates. His comments sent bank stocks and financial-sector exchange-traded funds lower.
The president told credit card companies to limit interest rates to 10%, roughly half the current industry average, or face potential legal consequences. However, no specific law appears to be involved, and implementing such a cap would likely require approval from Congress. The remarks have increased uncertainty for banks following a year of robust performance.
"Since the president took office, we've really seen a strong rally in these large US banks," said Rene Reyna, head of thematic and specialty ETF strategy at Invesco. "A lot of that was around their ability to not only scale up and provide consistent revenue streams but also this idea around deregulation."
Major credit card issuers saw significant declines. Capital One dropped more than 10% over five days, Citigroup fell 5%, JPMorgan Chase declined 6%, American Express was down 7%, and Bank of America slipped 4%. Invesco's KBW Bank ETF lost 3% over the same period. That $6 billion fund had returned over 32% during 2025, more than double the 15% gain of the S&P 500 Financials Index.
"We've clearly seen investor demand, and we've had our best year in terms of flows," Reyna said, referring to the more than $2 billion the ETF attracted last year.
Other large financial-sector ETFs also declined. State Street's $54 billion Financial Select Sector SPDR ETF fell 4% over five days after a 15% gain in 2025. Vanguard's $14 billion Financials ETF dropped 3% following last year's 15% climb. The $4 billion iShares US Financials ETF slipped 3% after an 18% increase in 2025.
Aniket Ullal, head of ETF research and analytics at CFRA Research, stated that while an interest rate cap is unlikely to be implemented, if it were to materialize, "it will have a significant impact on the earnings of banks and the ETFs that hold them." He added, "These changes are likely to impact ETFs that hold stocks like Capital One that rely heavily on credit card earnings."
Reyna noted that the White House's pressure on Federal Reserve Chair Jerome Powell and a proposal to limit financial institutions from buying single-family homes are also affecting lender stocks, strengthening the case for diversification among financial services holdings. The credit card issue "is creating a little bit of noise in the market," he said. "The fundamental question here is, 'Can President Trump put this into law without legislative backing?' As we are learning in his second term, there is a lot of testing the boundaries in terms of what he is able to do."