The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Credit card cap
Today equities worried about the 10% interest rate cap on credit cards that President Trump announced last week. JPM is the poster child for this issue. The company beat estimates, traded up a bit in the premarket, opened slightly higher, and then faded fast, losing 3% by 10 AM and drifting further down over the day. The credit card complex was sold significantly today and JPM’s drop was a piece of that. Financials were the worst performing sector today and it seems they set the mood for the market. The yield curve didn’t change much and the probability of a 25-bip Fed cut in January is now down to 3%.
The start of earnings season should have kindled some bullish enthusiasm for the health of corporate results but the earliest reports were overshadowed by the credit card cap. This was a big news item when it broke last week but the market is taking it more seriously today. What was discounted as a mere Trumpism last week appears to be a pending policy implementation, which will have quite negative outcomes for not only the credit card businesses, but also those individuals who get shut out of the credit card market.
At this point, it looks like this will be quite a fight with lots of lobbying. The legislation is called the Credit Card Competition Act of 2023 and it’s been stalled (for obvious reasons) but has found new life with the President’s endorsement. Financials have performed very well and this looks like a hiccup in what’s been a more popular investment play. It probably makes sense to watch the financials for sentiment leadership.
Earnings season started a bit bumpily but there’s a lot yet to go. Let’s see if the market changes its narrative as more earnings reports come out and the credit card legislation changes via the official process.
See you tomorrow.
-Mike
Visdom Market Commentary
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