During President Donald Trump's time in office, stock market indices have registered notable gains. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite climbed by 57%, 70%, and 142%, respectively, throughout his first term. Since the start of his current tenure on January 20, 2025, these benchmarks continued their upward trend, increasing by 13%, 15%, and 18%, respectively, up to February 3, 2026.
Investors' enthusiasm is fueled by several factors. One principal element has been the administration's significant tax reforms, notably the Tax Cuts and Jobs Act (TCJA) enacted in December 2017. This legislation permanently lowered the peak corporate tax rate from 35% to 21%, reaching its lowest point since 1939. Although aimed at stimulating hiring, acquisitions, and innovation, a pronounced consequence has been the surge in share repurchases among S&P 500 companies, which exceeded $1 trillion in 2025, setting an all-time record. Buybacks in financially strong companies help enhance earnings per share, reinforcing stock appeal among market participants.
President Trump's "America First" approach also contributed to domestic investment boosts, despite occasional market perturbations over tariffs and trade policies. Additionally, excitement surrounding emerging technologies—such as blockchain in his first term, followed by artificial intelligence and quantum computing more recently—along with robust corporate earnings, has supported the market’s rise, lifting major indices to historic closing highs.
Nonetheless, beneath this bullish environment lie emerging vulnerabilities tied to the Federal Reserve’s current state. The Federal Open Market Committee (FOMC), tasked with monetary policy oversight, is experiencing rare internal disagreements. Comprising 12 members including Chairman Jerome Powell, the FOMC influences financial conditions by setting target rates and conducting operations involving U.S. Treasury securities.
Historically, FOMC members have presented a united front, offering the market a sense of reassurance. Recently, however, each of the last five meetings featured dissenting opinions, sometimes in stark contrast. Notably, the October and December meetings exhibited opposing dissents: while the committee agreed on a quarter-point rate cut, some members argued against any reduction and others advocated for a more aggressive half-point cut.
Such discord is uncommon; since 1990, only three meetings have seen oppositional dissents, with two occurring late last year. This fracturing may erode investor trust in the Fed’s capacity to guide monetary policy predictably.
Compounding uncertainties is the scheduled end of Jerome Powell's term as Fed chair on May 15, 2026. President Trump's nominee to succeed him, former Fed Governor Kevin Warsh, faces an uncertain confirmation process in the Senate. Additionally, Warsh's previously expressed preference to reduce the Fed's $6.6 trillion balance sheet raises questions about potential impacts on long-term interest rates and mortgage costs should the central bank retreat from the Treasury bond market.
These tensions come at a time when the equity markets are valued near historic highs. The S&P 500's Shiller Price-to-Earnings Ratio indicates it is the second-most expensive market in over 150 years, signaling limited room for error. Consequently, the combination of internal Federal Reserve divisions, leadership changes, and already elevated market valuations may jeopardize the sustainability of the significant gains experienced under President Trump’s tenure.