The stock market performance during President Donald Trump’s second term has been notably weak, marking the lowest gains for any president in their first year since George W. Bush in 2005. From Inauguration Day to January 20, 2026, the S&P 500 index rose by only 13.3%. While this is a positive figure in absolute terms, it represents the worst first-year performance in two decades, according to data from CFRA Research.
In contrast, the S&P 500 surged by 24.1% in the first year of Trump’s first term. The current market has benefited from a broader rally, primarily fueled by excitement over advancements in artificial intelligence. For the first time in several years, international stocks outperformed their U.S. counterparts in 2025, highlighting a significant shift in market dynamics.
Trump’s second term follows a period of robust growth, with the S&P 500 achieving its first back-to-back annual gains exceeding 20% since the 1990s. The expectations for further growth were inherently high as the market navigated the complexities of policy changes under the Trump administration. Uncertainty surrounding tariffs led to significant fluctuations, with the S&P 500 nearly entering bear market territory in April before recovering sharply after the president softened his stance on certain trade issues.
Throughout the past year, the S&P 500 reached a total of 39 record highs, a stark contrast to the 62 record highs recorded in 2017, the first year of Trump’s first term. Trump appears acutely aware of the stock market’s significance as a measure of his administration’s success. Recently, he referred to a dip in stock prices caused by trade uncertainties as “peanuts,” expressing confidence that the market would rebound.
Positive sentiment surrounding the market was bolstered by a series of favorable factors, including robust corporate earnings and optimism regarding potential interest rate cuts from the Federal Reserve. In addition, Trump signed the “One Big Beautiful Bill Act” into law, which analysts believe could stimulate further market growth.
According to Matt Maley, chief market strategist at Miller Tabak + Co, the initial stimulus from this policy has been a driving force behind the stock market’s performance in the president’s second year. He noted that many investors anticipate the administration will seek to maintain a strong market leading into the midterm elections.
Despite solid gains, the year was also characterized by volatility. The VIX, often referred to as Wall Street’s fear gauge, spiked to historically high levels in the spring amid trade-related uncertainties. Nick Colas, co-founder at DataTrek Research, highlighted that the VIX surpassed 50 for the first time since the pandemic, reflecting the intense market reactions to policy changes.
Investment strategies have also adapted to this climate of uncertainty. Tim Thomas, chief investment officer at Badgley Phelps Wealth Management, indicated that he has adjusted client portfolios to be more defensive, focusing on less exposure to risky assets while emphasizing the importance of long-term fundamentals, including strong earnings growth and ongoing technological advancements.
As the market looks ahead, there is cautious optimism for continued growth. Despite the U.S. dollar facing challenges and safe-haven assets like gold and silver reaching record highs, Jim Hagerty, CEO at Bartlett Wealth Management, advises investors to remain disciplined. He emphasizes the importance of maintaining a suitable asset allocation and rebalancing as necessary, particularly in light of recent market fluctuations.
The upcoming year poses both challenges and opportunities, as investors navigate the complexities of a politically charged economic landscape. The focus on disciplined investment strategies and long-term growth remains crucial for success in this evolving market environment.
