Headwinds are mounting for a historically expensive stock market during Trump’s second, non-consecutive term.
From an investment standpoint, President Donald Trump’s first term in the White House was a resounding success. When he left office on Jan. 20, 2021, Trump had overseen cumulative returns in the ageless Dow Jones Industrial Average (^DJI +2.47%), benchmark S&P 500 (^GSPC +1.97%), and innovation-inspired Nasdaq Composite (^IXIC +2.18%) of 57%, 70%, and 142%, respectively.
His second, non-consecutive term has offered something of an encore performance. From Inauguration Day (Jan. 20, 2025) through the closing bell on Feb. 2, 2026, the Dow, S&P 500, and Nasdaq have respectively risen by 14%, 16%, and 20%. All three indexes have hit several record-closing highs since Trump’s latest term began.
President Trump delivering remarks. Image source: Official White House Photo by Andrea Hanks, courtesy of the National Archives.
While investors have lauded a lower peak marginal corporate income tax rate and the Federal Reserve’s ongoing rate-easing cycle, the stock market isn’t without its fair share of risks.
Statistically, headwinds are mounting on Wall Street and threatening to upend what’s been a robust rally during Trump’s tenure. But is a stock market crash really in the cards under President Trump? Let’s allow several century-old data sets to weigh in.
Historical precedent is a potential problem for Wall Street
Before proceeding any further, keep in mind that no data set or correlated event can guarantee a short-term directional move in one or more of the stock market’s major indexes. Despite this lack of a guarantee, it’s not uncommon for history to rhyme on Wall Street.
Arguably, no time-tested data set lays the groundwork for potential stock market downside quite like the Shiller Price-to-Earnings (P/E) Ratio, which is also known as the cyclically adjusted P/E ratio, or CAPE Ratio. This valuation tool, which is based on average inflation-adjusted earnings over the previous 10 years, has been back-tested to January 1871.
Over the last 155 years, the S&P 500’s Shiller P/E has averaged about 17.3. Throughout January, the CAPE Ratio hovered between 39 and 41, representing the second-priciest stock market in history.
S&P 500 Shiller PE Ratio hits 2nd highest level in history 🚨 The highest was the Dot Com Bubble 🤯 pic.twitter.com/Lx634H7xKa
— Barchart (@Barchart) December 28, 2025
Historically, Shiller P/E ratios above 30 have portended significant downside for the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite. Although the CAPE Ratio doesn’t help determine when stock market corrections or crashes will begin, every instance where it’s surpassed 30 has led to an eventual 20% to 89% decline in one or more of the stock market’s major indexes.
But this isn’t the only century-old data set that suggests the stock market may be in trouble.
Over the last 113 years, there’s also been an uncanny correlation between U.S. recessions and the political party in the White House.
Since 1913, 19 presidents have occupied the Oval Office, nine of whom were Democrats and 10 were Republicans. Four of the nine Democrats didn’t see an economic recession take shape during their presidency. Meanwhile, all 10 Republicans, including Donald Trump during his first, non-consecutive term, have overseen the start of a recession.
Although the stock market isn’t tied at the hip to the U.S. economy, economic weakness would be expected to adversely impact corporate profits. In other words, recessions have a way of eventually weighing on Wall Street.
This is also a midterm election year — and midterms have historically led to heightened volatility for stocks.
Get ready to hear a lot about this, but midterm years tend to see their ultimate low later in the year and have some of the largest intra-year corrections.
The good news? Since 1950, off those lows stocks have never been lower a year later and up more than 30% on average. pic.twitter.com/WuWr8vWCJN
— Ryan Detrick, CMT (@RyanDetrick) November 16, 2025
According to data aggregated by Carson Group’s Chief Market Strategist, Ryan Detrick, the S&P 500 has navigated its way through larger corrections during midterm election years. Since 1950, the average midterm drawdown for the benchmark index has been 17.5%. For added context, the S&P 500 fell almost 20% during the second year of Donald Trump’s first term.
The reason midterm elections can create chaos on Wall Street is that a slight shift in voters can shake-up Congress. With Republicans holding a slim majority of seats in the House of Representatives, a minor change in voting could lead to congressional gridlock.
While all of these time-tested historical data points suggest stocks could fall (significantly) in the not-too-distant future, they don’t point to an outsize probability of a stock market crash taking shape. Though this doesn’t mean a crash is off the table, it isn’t something investors should be overly concerned about.
Image source: Getty Images.
History overwhelmingly favors optimists
The funny thing about Wall Street history is that the outlook can be dramatically altered based on how much investors are willing to widen or narrow their proverbial lens.
As much as investors dislike seeing red arrows in their portfolios, stock market corrections, bear markets, and the occasional elevator-down move in the Dow, S&P 500, and Nasdaq Composite are normal and inevitable events. These moves lower are best thought of as the price of admission to the greatest wealth creator on the planet.
But the one characteristic these downturns do share is the propensity to resolve quickly. The COVID-19 crash under President Trump hit its trough after just 33 calendar days, while the tariff-induced crash in April 2025 bottomed out after four trading sessions.
In comparison, bull markets on Wall Street typically last for a long time.
In June 2023, shortly after the S&P 500 was confirmed to be in a new bull market, analysts at Bespoke Investment Group compared the length of every bull and bear market for the S&P 500 since the start of the Great Recession (September 1929).
It’s official. A new bull market is confirmed.
The S&P 500 is now up 20% from its 10/12/22 closing low. The prior bear market saw the index fall 25.4% over 282 days.
Read more at https://t.co/H4p1RcpfIn. pic.twitter.com/tnRz1wdonp
— Bespoke (@bespokeinvest) June 8, 2023
On the one hand, the average S&P 500 bear market hit its trough after 286 calendar days, or roughly 9.5 months. In total, only eight out of 27 bear markets reached the one-year mark. Comparatively, the typical bull market persisted for 1,011 calendar days (about two years and nine months), with roughly half lasting longer than the lengthiest bear market (630 calendar days).
The disproportionate nature of stock market cycles is also apparent in a data set from Crestmont Research that stretches back to 1900. Analysts calculated the rolling 20-year total returns, including dividends, of Wall Street’s benchmark index. This yielded 107 rolling 20-year periods (1900-1919, 1901-1920, and so on, through 2006-2025).
What Crestmont Research was able to show is that all 107 rolling 20-year timelines produced a positive annualized return. Put in another context, no matter what was thrown investors’ way — stock market corrections, bear markets, crashes, wars, pandemics, tariffs, etc. — the S&P 500 was higher for every 20-year period examined.
Even if a short-lived period of stock market chaos ensues under President Donald Trump, optimistic long-term investors can take solace in the fact that time is on their side.
