Financials is worst sector in 2026. Is card rate cap debate to blame?
A strong economy lifting consumers , high M & A activity increasing investment banking fees and a loose regulatory environment were supposed to boost financial stocks in 2026. That isn’t coming to fruition yet. Financials is the worst performing sector in the S & P 500 this year, down more than 3% as of early trading Wednesday. The underperformance, however, hasn’t been universal within the group’s members. Investors say the divergence reveals that what’s dragging laggards aren’t concerns about tailwinds disappearing, but lingering fears over President Donald Trump’s proposed credit card interest rate cap at 10% . “While that’s mostly dismissed by a lot of buy-side investors, it’s still an uncomfortable overhang as the back and forth continues to go on over social media,” said Erika Najarian, large-cap banks analyst at UBS. A cap on credit card interest rates initially led to a broad sell-off across financials. But those without exposure to credit card policy risks, like pure investment bank stocks and regional banks that typically don’t have card portfolios, have been able to recover. Shares with exposure, though, continue to lag the market. Large-cap investment banks Goldman Sachs and Morgan Stanley are up on the year, while JPMorgan Chase and Bank of America — banks with both investment and commercial components — are each down more than 5%. The S & P Regional Banking Index is up more than 4.5% on the year, while Visa and Mastercard are down more than 7%. GS MS,BAC,JPM YTD line GS & MS vs. BAC & JPM year-to-date chart Congress would need to approve any changes to credit card interest rates, and only a few elected leaders — nowhere enough for a majority in either the Senate or House of Representatives — have voiced support for the plan. But the rhetoric and headlines continue to weigh on exposed stocks. RBC Capital Markets co-head of global financials research Gerard Cassidy predicted large-cap banks may not recover for some time. “The outlooks for these companies are good,” he said. “But the stocks, I think, have discounted those outlooks. And unless there’s some extraordinary uplift from these levels, the stocks probably go sideways or down from here.” If that’s the case, it would contradict what investors have typically done when Trump administration policies negatively impact stocks. Often traders used such instances as ” buy the dip ” moments, as Trump either quickly reverses course or shifts to make a policy less hostile for stocks. But that hasn’t happened in the case of these financial stocks, despite the president not having the power alone to implement the proposed policy. Matt Coad, a Truist analyst who covers Visa and Mastercard, said he is struggling to understand the lack of a buy-the-dip trade with these stocks. “I’ve been scratching my head over this,” he said. “I do think that there could be some legs to this,” referring to the move downward. The buy the dip trade from Trump’s policies has typically been driven by retail investors . Coad said that Visa and Mastercard are too stable and not like the high-risk, high-reward growth stocks that retail traders typically go for. That’s even despite the two stocks last year underperforming the broader market, making their valuations more attractive, he said. For the large-cap commercial banks, the three analysts agreed the credit card proposal may have been a catalyst for some investors to take some profits after big gains in those stocks in 2025. KRE V,MA YTD line V & MA vs. KRE year-to-date chart Regionals have been the winner so far in 2026. Najarian said cheaper valuations and a steeper yield curve are helping investors recover from the 2023 regional banking crisis and rotate into the stocks, particularly as what she predicts to be strong earnings come in. “The earnings revisions here that are positive may not be priced into the names quite yet,” Najarian said. Cassidy agreed with the regionals play and predicted the leadership role the group is playing now will last throughout the year. As for what can get some of the credit card companies out of their own funk, Coad said upcoming earnings for Visa and Mastercard may lead their shares lower due to a difficult comparison period, but strong macro outlooks should eventually push them higher. But policy clarity would remove a key barrier, he said. “Less regulatory issues help the narrative.” Visa and Mastercard are due to report earnings Thursday.
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