uploads/2018/06/cons.-fin.jpg

What’s Affected Consumer Finance Companies Recently?

By

Updated

Dow Jones witnessed a strong downtrend

On June 25, the Dow Jones Industrial Average (DJI) saw strong downward pressure primarily due to escalating trade tensions between China and the United States. The index closed at 24,252.80 after witnessing a fall of 1.3%.

Technology stocks benefited despite the trade tensions. The Trump administration now has its eyes on technology stocks.

Ongoing trade tensions have affected consumer finance companies primarily because they can erode consumer confidence, which affects the business fundamentals of these companies. On June 25, Mastercard (MA) witnessed a fall of 3.2%, while its competitor Visa (V) fell 3.3%.

Article continues below advertisement

Primary factors affecting consumer finance companies

Consumer finance companies’ revenues largely depend upon retail demand and purchasing patterns. Global disturbances affect consumer spending levels and, in turn, the businesses of Mastercard and Visa. Changes in these patterns could be why Mastercard and Visa fell after the Trump administration targeted another sector.

If trade tensions continue, global growth could witness negative momentum, which could, in turn, adversely affect consumer finance companies. Expected retaliatory action from China could further fuel a trade war.

A fall in retail spending could also affect the revenues of Discover Financial Services (DFS) and Capital One Financial (COF). Lower retail spending could lead to lower demand for consumer loans, which could impact the interest incomes of these companies.

Advertisement

More From Market Realist