Recently, financial stocks have been falling quite sharply, and the reasons behind this are worth paying attention to.

On January 9th, Trump proposed setting a one-year cap of 10% on credit card interest rates, saying it would take effect starting January 20th. He posted on X that Americans have been ripped off by credit card companies too badly, and those interest rates of 20-30% or even higher need to stop. Once this news broke, related financial stocks dropped accordingly.

Just look at the performance of the major credit card issuers—Bank of America fell 4.5%, JPMorgan Chase dropped 6.6%, American Express declined 6.8%, Capital One Financial decreased 9.9%, Citigroup fell 4.8%. Even payment networks like Visa and Mastercard weren’t spared, dropping 8% and 6.9%, respectively. The entire financial sector was heading downward, while the S&P 500 was still rising.

But here’s a key point—this kind of interest rate cap proposal isn’t new. Bernie Sanders introduced a similar bill last year, also with a 10% cap. The problem is, such measures need to pass Congress, and currently, that’s unlikely. The financial industry is already gearing up to fight back; Sanders’ bill was blocked in Congress last year, and similar measures pushed by the Consumer Financial Protection Bureau were also shot down by the financial sector. Many market observers believe this balloon will be pricked and won’t actually materialize.

So, this recent drop in financial stocks might be an overreaction. Once the market confirms that the interest rate cap won’t be implemented in the short term, stock prices should rebound.

More importantly, 2026 could be a good year for the financial industry. The Federal Reserve cut interest rates three times in 2025, and futures traders expect at least two more cuts this year. Plus, Trump is very likely to appoint a more aggressive Federal Reserve chair after Jerome Powell’s term ends in May, which could lead to steeper rate cuts.

Here’s a basic economic principle—when the Fed cuts rates, short-term interest rates fall faster than long-term rates, causing the yield curve to steepen. In simple terms, the federal funds rate is decreasing, but the 10-year Treasury yield remains relatively high, widening the gap. Banks profit from this spread—they borrow at lower short-term rates from depositors and lend at higher long-term rates to consumers and businesses. The steeper the yield curve, the more banks earn.

So, overall, the threat of a short-term credit card rate cap is unlikely to materialize soon, and the interest rate environment is moving in a direction more favorable to banks. Stock prices ultimately follow profits, which means now might be a good time to invest in financial stocks. The days of stocks tanking could be fleeting.