As President Donald Trump embarked on his second term in office, the stock market displayed tempered growth relative to historical trends for inaugural presidential years. From his inauguration through January 20, 2026, the S&P 500 posted a 13.3% increase — gains that, while solid on an absolute basis, represent the weakest performance by any president in the first year of a new term since 2005, when George W. Bush began his second term.
This performance contrasts markedly with the 24.1% surge the S&P 500 experienced during Trump's first year as president, indicating a noticeable deceleration in market momentum. The past year nonetheless featured continued bullishness underpinned by investor enthusiasm surrounding developments in artificial intelligence (AI), sectors that propelled the market higher over the period.
International equities, for the first time in years, outperformed their U.S. counterparts in 2025, adding a layer of complexity to the domestic market's performance narrative. These cross-border investment dynamics highlight an evolving landscape in global equity trends amid geopolitical and economic developments.
Contextually, Trump's second term followed impressive consecutive annual returns exceeding 20% in the S&P 500 — a feat not seen since the 1990s. This established a high baseline, making additional gains challenging to surpass. The backdrop to these market conditions included considerable policy volatility from the administration, notably regarding tariff implementations and trade negotiations.
April 2025 saw stocks verge on a bear market as tariff uncertainties heightened, creating significant market disruptions. However, the subsequent retreat from extreme tariff positions by the administration resulted in a swift market recovery, illustrating the strong influence of policy decision-making on investor sentiment.
Over the course of the year, the S&P 500 reached 39 record highs, a figure substantially lower than the 62 record highs set in 2017 during Trump's initial presidential year. The disparity suggests diminished incremental optimism as the administration progressed into its second term.
President Trump has acknowledged the market's trajectory, viewing stock performance as a metric of his administration's success. Following a dip linked to uncertainties surrounding discussions about Greenland and tariff strategies, Trump described the decline as "peanuts" and forecasted a market rebound with potential to "double." The subsequent easing of tariffs that day underscored the responsiveness of equity markets to administration policy signals.
Throughout 2025, U.S. equities advanced amid growing excitement about AI applications, anticipation surrounding potential Federal Reserve interest rate reductions, ongoing strength in corporate earnings, and a resilient economic environment. Additionally, the passage of the "One Big Beautiful Bill Act" represented a key legislative stimulus expected to energize economic growth and potentially underpin further market appreciation.
Market strategist Matt Maley of Miller Tabak + Co highlighted that front-loaded fiscal stimulus was a principal factor contributing to positive equity returns in the first year of the term. Maley noted that these dynamics coincide with a perceived administration strategy to sustain elevated economic activity through the period leading to midterm elections. While this approach may bolster market performance near term, he cautioned that the subsequent year might not replicate the same level of bullishness.
The year was characterized not only by gains but also heightened volatility. The CBOE Volatility Index (VIX), a barometer of market fear, spiked above 50 in the spring amid trade policy anxieties — reaching levels unseen since the pandemic's peak. This volatility reflected the uncertainty imbued by tariff-related rhetoric and shifts.
Investment professionals have adapted their strategies accordingly. Tim Thomas, chief investment officer at Badgley Phelps Wealth Management, has shifted some client portfolios toward more defensive postures to mitigate risk exposure. Nonetheless, he emphasizes a focus on long-term fundamentals such as earnings strength and the benefits derived from the AI boom alongside supportive fiscal policy.
Thomas remarked on the inherent challenges posed by policy uncertainty, describing its unpredictable and instantaneous nature as complicating investment decisions. He advocates for hedging strategies alongside a commitment to fundamental analysis as pivotal for navigating such conditions.
Looking ahead, Wall Street broadly expects the S&P 500 to continue rising, buoyed by momentum from recent years. However, ongoing uncertainty persists, exemplified by weaknesses in the U.S. dollar and record highs in traditional safe havens such as gold and silver. Bartlett Wealth Management CEO Jim Hagerty advises investors to maintain discipline amid these turbulent dynamics.
Hagerty underlines the importance of steadfast adherence to investment principles, particularly during periods of strong market performance or heightened volatility that might tempt departures from established asset allocations. Regular assessment and rebalancing remain essential tools to ensure portfolios align with risk tolerance and investment objectives.
Consequently, the initial year of President Trump's second term in office exhibited a complex blend of encouraging market gains tempered by significant volatility and policy flux. The equity environment was shaped by a convergence of fiscal stimulus, technological enthusiasm, and governmental decision-making, underscoring the multifaceted challenges and opportunities confronting investors.