In President Donald Trump’s initial year of his second term, the stock market exhibited the lowest performance compared to any president’s first year of a new term since 2005, the year George W. Bush commenced his second term. From Trump’s inauguration day to January 20, 2026, the S&P 500 experienced an increase of 13.3% — a robust performance by conventional measures. However, it marked the most unfavorable beginning to a presidency in two decades. In contrast, the S&P 500 experienced a 24.1% increase during the initial year of Trump’s first term, as reported. Equities have experienced an upward trajectory over the past year, continuing a bull market fueled by optimism surrounding artificial intelligence. In 2025, international stocks surpassed their U.S. counterparts for the first time in years. The stock market, naturally, does not function in isolation. Trump’s second term followed the S&P 500’s initial consecutive annual increases exceeding 20% since the 1990s. The threshold for additional advancements was already established at a considerable level. Nonetheless, the previous year has been characterized by significant policy fluctuations originating from the Trump administration.
In April, equities approached bear market territory due to tariff-related uncertainties, only to experience a significant recovery as Trump moderated his most extreme threats. The S&P achieved 39 record highs throughout the year. In contrast, the index achieved 62 record highs in 2017, the inaugural year of Trump’s first term. Trump seems cognizant of the performance of the market and perceives it as an indicator of his success. On Wednesday, he remarked that the recent decline in the stock market, attributed to uncertainty surrounding Greenland and tariffs, was merely “peanuts” and asserted that the market would soon be “doubled.” He retracted his tariffs later in the day, resulting in a rebound in stock prices. In 2025, US equities experienced an uptick driven by heightened enthusiasm surrounding artificial intelligence, a prevailing optimism regarding potential interest rate reductions by the Federal Reserve, strong corporate earnings, and a resilient economic backdrop. In the summer, Trump also enacted his “One Big Beautiful Bill Act.” The stimulative impact of that policy may yield an additional uplift to markets this year. “The front-end loading of this stimulus is a significant factor contributing to the stock market’s performance during the initial year of this term,” stated Matt Maley.
“This is also why many investors are considering that the president aims to ‘let the economy run hot’ through the midterm elections,” Maley stated. “This does not imply that the second year will exhibit the same bullishness for stocks as the first year; however, it is undeniable that the administration is keen on fostering a robust stock market this year, particularly in the 5-6 months preceding the midterm elections.” The initial year of Trump’s second term produced substantial gains accompanied by periods of volatility. In the spring, fear gauge experienced a significant increase, reaching historically high levels due to the turmoil associated with Trump’s tariffs. “The only truly exceptional thing was that the VIX went over 50 for the first time since the pandemic during the height of trade policy uncertainty,” stated Nick Colas. Tim Thomas said he’s adjusted some client portfolios to be more “defensive,” or have less exposure to risky assets, but ultimately is looking past short-term volatility and focusing on fundamentals like strong earnings growth, the AI boom and supportive fiscal policy.
“The market performance last year was pretty good,” Thomas said. “There is a lot of policy uncertainty out there. Policy uncertainty is hard to invest around, because, by its very nature, it can change in an instant. You need to have some kind of hedge in place,” Thomas said. “But the other key is just really staying focused on the long term and staying focused on the companies and their fundamentals. Ultimately, these factors will serve as the primary determinants of the returns. Following three consecutive years of robust performance, there is a prevailing consensus that the S&P 500 is poised for further ascension this year. However, uncertainty prevails. The US dollar faces ongoing challenges this year, as safe havens such as gold and silver reach unprecedented levels. Jim Hagerty conveyed that his primary insight from the previous year is the importance of maintaining discipline among investors. “When markets have performed exceptionally well, or at times when they induce fear, it can lure individuals away from their established disciplines,” Hagerty stated. “I would just emphasize the importance of maintaining discipline.” Considering the robustness of current conditions, it is prudent to meticulously assess your asset allocation, ensuring its appropriateness and rebalancing as required.