The stock market performance during President Donald Trump’s second term has registered the weakest first year of a presidential term since George W. Bush in 2005. From Inauguration Day until January 20, 2026, the S&P 500 index increased by 13.3%. Although this represents solid gains, it marks the most disappointing start for a presidency in the past two decades. In comparison, the S&P 500 had a much stronger performance of 24.1% during the first year of Trump’s initial term, according to CFRA Research.
Despite the relatively lower performance in the U.S., international stocks outpaced their American counterparts in 2025 for the first time in years. The stock market does not exist in isolation; Trump’s second term followed a period where the S&P 500 had achieved back-to-back annual gains exceeding 20% for the first time since the 1990s, creating high expectations for further growth. The past year, however, has been marred by significant policy shifts from the Trump administration, causing turbulence in the market.
In April 2025, stocks dipped dangerously close to a bear market due to uncertainty surrounding tariffs. The situation improved significantly when Trump retracted some of his more severe tariff threats. Over the course of the year, the S&P 500 recorded 39 all-time highs, a stark contrast to the 62 record highs achieved in 2017, the first year of his previous term.
Trump appears to consider the stock market a measure of his administration’s success. On a recent occasion, he referred to a decline linked to uncertainty over Greenland and tariffs as “peanuts,” expressing confidence that the market would soon “double.” Following his decision to ease some tariff pressures, the stock market rebounded.
Investors saw gains in 2025, driven by enthusiasm surrounding artificial intelligence, optimism regarding potential interest rate cuts from the Federal Reserve, and strong corporate earnings, all within a resilient economy. Additionally, Trump signed the “One Big Beautiful Bill Act” into law during the summer, which is expected to stimulate market activity further. Matt Maley, chief market strategist at Miller Tabak + Co, pointed out that the early impact of this stimulus was a significant factor behind solid market performance in the first year of Trump’s second term.
Maley noted that many investors believe the administration is keen to maintain a robust economy leading into the midterm elections, although he cautioned that the second year may not necessarily see the same bullish sentiment.
The first year of Trump’s second term was characterized by strong gains but also considerable volatility. The VIX, Wall Street’s fear gauge, spiked to historically high levels in spring due to trade policy uncertainties. Nick Colas, co-founder at DataTrek Research, commented on the significant rise in VIX levels, indicating that it surpassed 50 for the first time since the pandemic.
Tim Thomas, chief investment officer at Badgley Phelps Wealth Management, stated that he has adjusted client portfolios to be more defensive, reducing exposure to risky assets. Nevertheless, he emphasizes the importance of focusing on long-term fundamentals, such as earnings growth and fiscal policy, rather than getting distracted by short-term fluctuations.
Investors are advised to remain disciplined, particularly in light of the market’s historical performance over the past three years. Jim Hagerty, CEO at Bartlett Wealth Management, highlighted the need for investors to adhere to their strategies, especially during times of market volatility. He advised a careful reassessment of asset allocations to ensure they remain suitable in the current climate.
Looking ahead, while the S&P 500 is expected to continue climbing, uncertainties loom. The U.S. dollar faces challenges, and safe-haven assets like gold and silver are reaching record highs. The path forward may require a careful balance of vigilance and strategic decision-making as economic conditions evolve.
