The stock market’s performance during Donald Trump’s presidency has garnered significant attention, with impressive gains observed in major indices. During his first term from January 20, 2017, to January 20, 2021, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite witnessed increases of 57%, 70%, and a staggering 142%, respectively. Following his inauguration for a second term on January 20, 2025, these indices keep climbing, recording additional gains of 15%, 16%, and 18% up to February 11.
While Trump’s policies, including a reduction in the corporate tax rate from 35% to 21%, are credited with fueling optimistic market behaviors and substantial share buybacks, a narrative of potential volatility looms. Speculation around a possible stock market crash in the second year of his term has begun to surface, leading analysts to scrutinize historical patterns.
Financial analysts emphasize that while patterns of history often provide insight, they do not guarantee future outcomes. One focal point is the Shiller Price-to-Earnings (P/E) Ratio, also known as the Cyclically Adjusted P/E Ratio. This metric, which averages inflation-adjusted earnings over the past ten years, currently stands at 40.35—making it the second-highest valuation in 155 years, surpassed only by the dot-com bubble. Historically, P/E Ratios above 30 have indicated a turbulent market ahead; past occurrences have seen major indices drop 20% or more when this threshold was crossed during bull markets.
In addition to valuation concerns, historical trends regarding emerging technologies provide further context. Historical data shows that transformative innovations often lead to market bubbles, as investors may overestimate the timing and optimization of new technologies. For instance, the current fascination with artificial intelligence (AI) faces skepticism regarding its profit-generating capacity over time, similar to the internet’s earlier challenges.
Another factor influencing market dynamics is the historical precedent set by midterm elections. Traditionally, the S&P 500 experiences more pronounced corrections during these years, with significant downturns typically occurring as elections approach. With the upcoming midterm elections in November 2026 and the Republicans holding a slim majority in the House, voter sentiment could lead to congressional shifts. According to Carson Group’s Chief Market Strategist, Ryan Detrick, historical data shows average peak-to-trough downturns of approximately 17.5% in midterm years, signaling a pattern that investors should heed.
Despite these potentially bearish signals, analysts reinforce that corrections and bear markets, though daunting in the moment, tend to be short-lived. For example, the recent COVID-19 market correction resolved within 33 days, and the subsequent downturn in 2025 lasted only four days. Bull markets, however, demonstrate remarkable endurance; the current “AI Bull” market has surpassed the 1,200-day mark and reflects historical resilience.
Recent analyses emphasized that the average length of bull markets significantly outstrips that of bear markets, which typically last around 286 days. The data suggests that though investors must remain cautious, historically, the long-term trend leans in favor of optimistic outcomes for the market, favoring those who adopt a patient investment strategy.
In summary, while the potential for short-term volatility exists, the longer-term view remains one of optimism, indicating that historical trends may offer guidance but never certainties. Investors are advised to navigate this complex landscape with a balanced perspective, recognizing both the risks and opportunities that lie ahead.
