The stock market during President Donald Trump‘s first year of his second term has recorded the weakest performance of any president since George W. Bush in 2005. From Inauguration Day to January 20, 2026, the S&P 500 rose by 13.3%. While this figure reflects healthy gains, it marks the lowest increase for a presidential first year in over two decades. In comparison, the index experienced a remarkable 24.1% gain during the first year of Trump’s initial presidency, according to data from CFRA Research.
Despite this underwhelming start, the past year has seen stocks rebound, largely driven by excitement surrounding advancements in artificial intelligence (AI). For the first time in years, international stocks outperformed those in the United States. Trump’s second term commenced following the S&P 500’s unprecedented back-to-back annual gains exceeding 20%—a feat not seen since the 1990s. This high bar for further gains has influenced market expectations.
Market Volatility and Policy Impact
The past year has also been characterized by significant volatility, with stocks nearing bear market territory in April amid tariff uncertainties. Following a series of decisions from the Trump administration, the market rebounded sharply. The S&P 500 achieved 39 record highs throughout the year, a stark contrast to the 62 record highs reached in 2017, the first year of Trump’s first term.
Trump has expressed a keen awareness of the stock market’s fluctuations, often referencing it as a measure of his administration’s success. Following a dip attributed to concerns over tariffs and international trade, Trump minimized the market’s decline, referring to it as “peanuts,” and predicted it would soon double.
The stock market’s performance in 2025 has been buoyed by optimism regarding potential interest rate cuts from the Federal Reserve, strong corporate earnings, and a resilient economy. Additionally, Trump’s introduction of the “One Big Beautiful Bill Act” in the summer could further stimulate market growth.
Investor Strategies in Uncertain Times
The year has produced solid gains accompanied by notable market volatility. The VIX, Wall Street’s fear gauge, surged to record levels earlier in the year, indicating heightened investor concern. Nick Colas, co-founder of DataTrek Research, noted that the VIX exceeded 50 for the first time since the pandemic during periods of trade policy uncertainty.
Despite these fluctuations, some investment professionals are adopting a more cautious approach. Tim Thomas, chief investment officer at Badgley Phelps Wealth Management, has adjusted client portfolios to reduce exposure to risky assets while maintaining a focus on long-term fundamentals, such as earnings growth and the AI boom. He emphasized the importance of having a hedge against policy uncertainties that can change rapidly.
Looking ahead, Wall Street anticipates further growth for the S&P 500 this year, although significant uncertainties remain. The US dollar continues to face challenges, with safe havens like gold and silver reaching record highs. Jim Hagerty, CEO of Bartlett Wealth Management, advises investors to remain disciplined during both prosperous and turbulent market periods. He encourages a thorough review of asset allocations to ensure they align with individual investment strategies.
As the market navigates a complex landscape, the interplay of policy decisions, economic performance, and investor sentiment will continue to shape the trajectory of the stock market in the months to come.
