American Express stock well-positioned to weather Trump’s credit card cap
American Express (NYSE: AXP) is slipping this morning after President Donald Trump signalled a one-year freeze on credit card interest rates – proposing a 10% cap starting January 20th.
The announcement rattled investors since such a seismic policy shift could hurt card issuers’ profits from revolving balances – the lucrative portion of debt carried month to month.
With earnings season underway and inflation data looming, traders are currently hypersensitive to policy headlines.
That said, Trump’s social media post is far from sufficient to warrant immediately cutting exposure to American Express stock that remains up a whopping 55% versus its 52-week low.
Why Trump’s post isn’t significant for American Express stock
The market’s knee-jerk reaction overlooks a crucial fact – Trump’s post was made on Truth Social, not in a formal policy setting.
Implementing such a cap would require congressional action, and there’s reason to believe the US lawmakers wouldn’t approve such a policy change.
Why? Because if the President’s proposal were to become law, businesses like American Express would simply reduce credit lines.
This will shrink credit availability, essentially driving borrowers to “less regulated – more costly” alternatives, as the Consumer Bankers Association pointed out in a statement on Monday.
Simply put, what Trump is attempting to implement here will put Americans at risk – a sufficient reason for Congress to reject his proposal.
What to expect from AXP shares if credit card cap becomes a law
American Express shares remain attractively positioned even if Trump’s proposal becomes law. Why? Because the New York-headquartered firm focuses more on affluent clients.
While a 10% cap may devastate banks, lending to subprime or revolving populations – who carry high balances at 25% interest – AMEX cardholders are primarily transactors.
They use credit cards mostly for the rewards and perks, and often pay in full – making AXP much less dependent on high-interest revolving debt than peers like Capital One.
It’s part of the reason why Wall Street analysts are keeping “bullish” as ever on American Express. Consensus rating on the fintech remains at “overweight” with price targets going as high as $462.
Note that AMEX currently pays a dividend yield of 0.91% which makes it even more attractive for income-focused investors.
What could drive AMEX higher in the near-term
Beyond Washington chatter, American Express shares enter the new year with “several” structural tailwinds.
The US Federal Reserve is broadly expected to lower its benchmark interest rate further in 2026 – a monetary policy stance that tends to support net interest margins.
Additionally, the steepening yield curve favours lenders, while the consumer loan demand remains resilient despite inflation concerns as well.
Spending trends are also holding firm, particularly among affluent cardholders who drive AMEX’s premium business model.
On January 30th, American Express is scheduled to report its Q4 results. Consensus is for it to earn $3.55 a share this quarter – up nearly 17% versus the same quarter last year.
Moreover, the credit card specialist is participating in the UBS Financial Services Conference next month, which, together with the earnings release, will offer investors more clarity on future growth, potentially driving the fintech stock up significantly in the near term.
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