Bank stocks slid yesterday as investors fixated on President Trump's proposed cap on credit card rates rather than on earnings. Yet the banks' results also showed that their trading revenue has surged, thanks in part to Trump's policies.

Why it matters: For the financial sector, Washington is both friend and foe.

Zoom out: Bank stocks outpaced the S&P 500 in 2025, and their most recent earnings this week have been strong.

• Bank of America's results beat forecasts.
• Bank of America and Wells Fargo reported their highest full-year net income in four years.

Yes, but: The proposed 10% cap on credit-card interest rates left a cloud over the earnings results.

• The first few questions on the Bank of America media call were about politics, not company fundamentals, with CEO Brian Moynihan saying a cap could have "unintended consequences."
• Citigroup's chief financial officer said the change could hurt the economy, and JPMorgan Chase's CFO said it was a "weakly supported" directive.

What they're saying: "There is little that any bank can do to alleviate investor concerns," Bank of America analysts wrote in a note on JPMorgan (yes, the banks have analysts that analyze other banks), pointing to investors' focus on the credit-card cap.

• Clarity will have to come from Washington, not from the banks on earnings calls.

Flashback: Unpredictable policy was a benefit for the banks not so long ago, driving market volatility and opportunities for trading last year.

• When Trump imposed sweeping global tariffs back in April, investors rushed to reposition their investments.
• The major banks profit from this kind of surge in client activity.
• BofA's trading revenue rose 23% in the final quarter of the year, a 10% increase from a year ago, and their best quarter ever.

A looser regulatory approach from the Trump administration was also a boon for dealmaking.

• M&A advisory business surged at Citigroup and rose at BofA.

The bottom line: As Trump pivots from pro-business to pro-affordability, who wins and loses on Wall Street under his leadership keeps changing.

Young investors who are anxious about their jobs in an AI future are hedging that by investing in the stock market, according to a study by the Oliver Wyman Forum of 300,000 investors since 2020.

Why it matters: Young investors often favor vibes and momentum over fundamentals — so they could get burned if this bull market stumbles.

What they're saying: Many younger investors "don't believe traditional milestones will bring security," such as buying a home or staying at a job for a long time, Ana Kreacic, chief operating officer of the Oliver Wyman Forum, tells Axios.

• Gen Z's desire for independence has led to a boom in investing among the cohort.
• They have a sense of urgency over having more money now, potentially leaving novice traders with a false impression of what their expected returns should look like.

Between the lines: Those attitudes are driven by the collision of several things, according to the authors of the study.

• Fears about job security amid a shaky economy with a widening wealth gap.
• A boom in social media fueling a desire for wealth.
• The rise of AI clouding the picture of the future.
• And the pandemic, which showed young people how everything they expected to happen, like graduations or school dances, can change in an instant.

By the numbers: 55% of those studied cite social media as the top reason they get into investing, more than four times that of baby boomers.

• The share of people feeling financial pressure has nearly doubled since 2022.

Threat level: This group of investors has yet to see a nasty market downturn, and the "buy-the-dip" mentality has so far worked out well for them.

• Experts tell Axios that investors don't appreciate the risks that such a mentality could have for the entire stock market.
• The second that dip buying looks as if it didn't work out, this group could pull their money out of the stock market, making a minimal downturn far worse, considering that retail trading accounts for a quarter of daily volume now.
• "That's the biggest risk," Christian Edelmann, managing partner for Oliver Wyman, tells Axios.

Zoom out: AI is acting as an "emotional buddy" for Gen Z investors, supporting them in their trading journeys, Edelmann says.

• While AI-powered investing advice could democratize exclusive and expensive financial advice, it can also take the personal out of personal finance.
• Without an advisor, young investors may not have a portfolio that's positioned for their risk tolerance or time horizon.

Thought bubble: Investing for your future is a good thing!

• But getting all your advice on investing from AI or influencers is not.

The Russell 2000, an index of smaller public companies, is on track to outperform the S&P 500 for a second consecutive week.

Why it matters: Is it finally time for small caps to have a sustainable rally?

What they're saying: Small-cap stocks are trading at one of their steepest valuation discounts to large caps in 50 years despite "earnings growth that is roughly in lockstep with large caps," portfolio managers at Janus Henderson wrote in a note to clients.

• This could set up an attractive entry to small caps, which also tend to rally in lower-rate environments, something the administration is focused on delivering.

Yes, but: Wall Street keeps calling for, and waiting on, a lasting small-caps rally.

• The AI goodness powering the market is in large caps.
• For small companies, it's too expensive and risky to feasibly invest in AI.

The bottom line: Investors are looking for under-owned corners of the market since so much growth is already priced in.

• It's unclear whether they should rent or own the current small-cap rally.