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Fintechs are 2024’s biggest gainers among financials

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Jason Wilk

Source: Jason Wilk

Jason Wilk, the CEO of digital banking service Dave, remembers the absolute low point in his brief career as head of a publicly-traded firm.

It was June 2023, and shares of his company had recently dipped below $5 apiece. Desperate to keep Dave afloat, Wilk found himself at a Los Angeles conference for micro-cap stocks, where he pitched investors on tiny $5,000 stakes in his firm.

“I’m not going to lie, this was probably the hardest time of my life,” Wilk told CNBC. “To go from being a $5 billion company to $50 million in 12 months, it was so freaking hard.”

But in the months that followed, Dave turned profitable and consistently topped Wall Street analyst expectations for revenue and profit. Now, Wilk’s company is the top gainer for 2024 among U.S. financial stocks, with a 934% year-to-date surge through Thursday.

The fintech firm, which makes money by extending small loans to cash-strapped Americans, is emblematic of a larger shift that’s still in its early stages, according to JMP Securities analyst Devin Ryan.

Investors had dumped high-flying fintech companies in 2022 as a wave of unprofitable firms like Dave went public via special purpose acquisition companies. The environment turned suddenly, from rewarding growth at any cost to deep skepticism of how money-losing firms would navigate rising interest rates as the Federal Reserve battled inflation.

Now, with the Fed easing rates, investors have rushed back into financial firms of all sizes, including alternative asset managers like KKR and credit card companies like American Express, the top performers among financial stocks this year with market caps of at least $100 billion and $200 billion, respectively.

Big investment banks including Goldman Sachs, the top gainer among the six largest U.S. banks, have also surged this year on hope for a rebound in Wall Street deals activity.

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Dave, a fintech firm taking on big banks like JPMorgan Chase, is a standout stock this year.

But it’s fintech firms like Dave and Robinhood, the commission-free trading app, that are the most promising heading into next year, Ryan said.

Robinhood, whose shares have surged 190% this year, is the top gainer among financial firms with a market cap of at least $10 billion.

“Both Dave and Robinhood went from losing money to being incredibly profitable firms,” Ryan said. “They’ve gotten their house in order by growing their revenues at an accelerating rate while managing expenses at the same time.”

While Ryan views valuations for investment banks and alternative asset manages as approaching “stretched” levels, he said that “fintechs still have a long way to run; they are early in their journey.”

Financials broadly had already begun benefitting from the Fed easing cycle when the election victory of Donald Trump last month intensified interest in the sector. Investors expect Trump will ease regulation and allow for more innovation with government appointments including ex-PayPal executive and Silicon Valley investor David Sacks as AI and crypto czar.

Those expectations have boosted the shares of entrenched players like JPMorgan Chase and Citigroup, but have had a greater impact on potential disruptors like Dave that could see even more upside from a looser regulatory environment.

Gas & groceries

Dave has built a niche among Americans underserved by traditional banks by offering fee-free checking and savings accounts.

It makes money mostly by extending small loans of around $180 each to help users “pay for gas and groceries” until their next paycheck, according to Wilk; Dave makes roughly $9 per loan on average.

Customers come out ahead by avoiding more expensive forms of credit from other institutions, including $35 overdraft fees charged by banks, he said. Dave, which is not a bank, but partners with one, does not charge late fees or interest on cash advances.

The company also offers a debit card, and interchange fees from transactions made by Dave customers will make up an increasing share of revenue, Wilk said.

While the fintech firm faces far less skepticism now than it did in mid-2023— of the seven analysts who track it, all rate the stock a “buy,” according to Factset — Wilk said the company still has more to prove.

“Our business is so much better now than we went public, but it’s still priced 60% below the IPO price,” he said. “Hopefully we can claw our way back.”

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Tariffs may raise much less than White House projects, economists say

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President Donald Trump speaks before signing executive orders in the Oval Office on March 6, 2025.

Alex Wong | Getty Images

President Donald Trump says that tariffs will make the U.S. “rich.” But those riches will likely be far less than the White House expects, economists said.

The ultimate sum could have big ramifications for the U.S. economy, the nation’s debt and legislative negotiations over a tax-cut package, economists said.

White House trade adviser Peter Navarro on Sunday estimated tariffs would raise about $600 billion a year and $6 trillion over a decade. Auto tariffs would add another $100 billion a year, he said on “Fox News Sunday.”

Navarro made the projection as the U.S. plans to announce more tariffs against U.S. trading partners on Wednesday.

Economists expect the Trump administration’s tariff policy would generate a much lower amount of revenue than Navarro claims. Some project the total revenue would be less than half.

Roughly $600 billion to $700 billion a year “is not even in the realm of possibility,” said Mark Zandi, chief economist at Moody’s. “If you get to $100 billion to $200 billion, you’ll be pretty lucky.”

The White House declined to respond to a request for comment from CNBC about tariff revenue.

The ‘mental math’ behind tariff revenue

There are big question marks over the scope of the tariffs, including details like amount, duration, and products and countries affected — all of which have a significant bearing on the revenue total.

The White House is considering a 20% tariff on most imports, The Washington Post reported on Tuesday. President Trump floated this idea on the campaign trail. The Trump administration may ultimately opt for a different policy, like country-by-country tariffs based on each nation’s respective trade and non-trade barriers.

But a 20% tariff rate seems to align with Navarro’s revenue projections, economists said.

The U.S. imported about $3.3 trillion of goods in 2024. Applying a 20% tariff rate to all these imports would yield about $660 billion of annual revenue.

“That is almost certainly the mental math Peter Navarro is doing — and that mental math skips some crucial steps,” said Ernie Tedeschi, director of economics at the Yale Budget Lab and former chief economist at the White House Council of Economic Advisers during the Biden administration.

Trade advisor to U.S. President Donald Trump Peter Navarro speaks to press outside of the White House on March 12, 2025 in Washington, DC. 

Kayla Bartkowski | Getty Images

That’s because an accurate revenue estimate must account for the many economic impacts of tariffs in the U.S. and around the world, economists said. Those effects combine to reduce revenue, they said.

A 20% broad tariff would raise about $250 billion a year (or $2.5 trillion over a decade) when taking those effects into account, according to Tedeschi, citing a Yale Budget Lab analysis published Monday.  

There are ways to raise larger sums — but they would involve higher tariff rates, economists said. For example, a 50% across-the-board tariff would raise about $780 billion per year, according to economists at the Peterson Institute for International Economics.

Even that is an optimistic assessment: It doesn’t account for lower U.S. economic growth due to retaliation or the negative growth effects from the tariffs themselves, they wrote.

Why revenue would be lower than expected

Tariffs generally raise prices for consumers. A 20% broad tariff would cost the average consumer $3,400 to $4,200 a year, according to the Yale Budget Lab.

Consumers would naturally buy fewer imported goods if they cost more, economists said. Lower demand means fewer imports and less tariff revenue from those imports, they said.

Tariffs are also expected to trigger “reduced economic activity,” said Robert McClelland, senior fellow at the Urban-Brookings Tax Policy Center.

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For example, U.S. companies that don’t pass tariff costs on to consumers via higher prices would likely see profits suffer (and their income taxes fall), economists said. Consumers might pull back on spending, further denting company profits and tax revenues, economists said. Companies that take a financial hit might lay off workers, they said.

Foreign nations are also expected to retaliate with their own tariffs on U.S. products, which would hurt companies that export products abroad. Other nations may experience an economic downturn, further reducing demand for U.S. products.

Tariffs could be a major rewiring of the domestic and global economy, says Mohamed El-Erian

“If you get a 20% tariff rate, you’re going to get a rip-roaring recession, and that will undermine your fiscal situation,” Zandi said.

There’s also likely to be a certain level of non-compliance with tariff policy, and carve-outs for certain countries, industries or products, economists said. For instance, when the White House levied tariffs on China in February, it indefinitely exempted “de minimis” imports valued at $800 or less.

The Trump administration might also funnel some tariff revenue to paying certain parties aggrieved by a trade war, economists said.

President Trump did that in his first term: The government sent $61 billion in “relief” payments to American farmers who faced retaliatory tariffs, which was nearly all (92%) of the tariff revenue on Chinese goods from 2018 to 2020, according to the Council on Foreign Relations.

The tariffs will also likely have a short life span, diluting their potential revenue impact, economists said. They’re being issued by executive order and could be undone easily, whether by President Trump or a future president, they said.

“There’s zero probability these tariffs will last for 10 years,” Zandi said. “If they last until next year I’d be very surprised.”

Why this matters

The Trump administration has signaled that tariffs “will be one of the top-tier ways they’ll try to offset the cost” of passing a package of tax cuts, Tedeschi said.

Extending a 2017 tax cut law signed by President Trump would cost $4.5 trillion over a decade, according to the Tax Foundation. Trump has also called for other tax breaks like no taxes on tips, overtime pay or Social Security benefits, and a tax deduction for auto loan interest for American made cars.

If tariffs don’t cover the full cost of such a package, then Republican lawmakers would have to find cuts elsewhere or increase the nation’s debt, economists said.

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Investors hope April 2 could bring some tariff clarity and relief. That may not happen

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Cliff Asness’s AQR multi-strategy hedge fund returns 9% in the first quarter during tough conditions

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Cliff Asness.

Chris Goodney | Bloomberg | Getty Images

AQR Capital Management’s multistrategy hedge fund beat the market with a 9% rally in the first quarter as Wall Street grappled with extreme volatility amid President Donald Trump’s uncertain tariff policy.

The Apex strategy from Cliff Asness’ firm, which combines stocks, macro and arbitrage trades and has $3 billion in assets under management, gained 3.4% in March, boosting its first-quarter performance, according to a person familiar with AQR’s returns who asked to be anonymous as the information is private.

AQR’s Delphi Long-Short Equity Strategy gained 9.7% in the first quarter, while its alternative trend-following offering Helix returned 3%, the person said.

AQR, whose assets under management reached $128 billion at the end of March, declined to comment.

The stock market just wrapped up a tumultuous quarter as Trump’s aggressive tariffs raised concerns about an severe economic slowdown and a re-acceleration of inflation. The S&P 500 dipped into correction territory in March after hitting a record in February.

For the quarter, the equity benchmark was down 4.6%, snapping a five-quarter win streak. The tech-heavy Nasdaq Composite lost 10.4% in the quarter, which would mark its biggest quarterly pullback since a 22.4% plunge in the second quarter of 2022.

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