Trump’s second term posts weakest stock performance in two decades

The stock market delivered positive returns during Donald Trump’s first year back as president, but the gains fell short compared to other recent presidential terms, marking the slowest start for any president in two decades.

Market indexes climbed 13.3% between inauguration day and January 20, 2026, according to data from CFRA Research seen by CNN. While these returns appear solid on their own, they represent the smallest first-year increase for a president since George W. Bush began his second term in 2005. The performance also trailed Trump’s own previous record, during his initial term as president, markets jumped 24.1% in the first twelve months.

Investors pushed stocks upward throughout the year, continuing a rally fueled largely by excitement surrounding artificial intelligence technology. Meanwhile, foreign markets beat U.S. stocks in 2025, a shift that hadn’t occurred in several years.

However, the market didn’t start from scratch. Trump took office following two consecutive years where the S&P 500 had climbed more than 20% annually, a streak not seen since the 1990s. This meant expectations were already elevated when his second term began.

Tariff turmoil triggers historic volatility spike

The past year brought significant uncertainty as the administration changed direction repeatedly on key policies. Markets dropped close to bear market territory in April when confusion over tariff plans spooked investors. Prices then bounced back sharply after Trump stepped away from his harshest proposed measures. Overall, the S&P 500 hit 39 all-time highs during the year. By comparison, the index reached 62 record peaks in 2017 during Trump’s first year in office.

Trump has shown he pays attention to market movements and sees them as a measure of how well his presidency is going. This week, he dismissed recent market declines tied to concerns about Greenland and tariffs as “peanuts,” predicting the market would soon be “doubled.” Hours after those comments, he pulled back on tariff threats, which helped stocks recover.

Several factors supported market growth in 2025. The artificial intelligence sector remained a major draw for investors. People felt optimistic about potential Federal Reserve interest rate reductions. Company profits stayed strong. The economy held up better than many expected. Trump also signed the “One Big Beautiful Bill Act” during the summer months. The economic boost from that legislation could help markets continue rising this year.

“The front-end loading of this stimulus is a big reason why the stock market did well the first year of this term,” Matt Maley, chief market strategist at Miller Tabak + Co, wrote in an email.

Maley added that many investors believe the president plans to “let the economy run hot” through the midterm elections. While this doesn’t guarantee the second year will match the first year’s performance, he noted the administration clearly wants markets performing well this year, particularly in the five to six months before those elections.

Fear gauge hits pandemic levels

The year brought both gains and wild swings. The VIX, which measures how worried Wall Street feels, spiked to levels not seen since the pandemic when tariff confusion peaked in spring.

“The only truly exceptional thing was that the VIX went over 50 for the first time since the pandemic during the height of trade policy uncertainty,” Nick Colas, co-founder at DataTrek Research, explained in an email.

Tim Thomas, chief investment officer at Badgley Phelps Wealth Management, said he’s shifted some client accounts to be more “defensive” with less risky holdings. But he’s ultimately looking beyond short-term price swings and concentrating on fundamentals like earnings growth, the AI boom, and helpful government policies.

“The market performance last year was pretty good,” Thomas said. “There is a lot of policy uncertainty out there. Policy uncertainty is hard to invest around, because, by its very nature, it can change in an instant.”

After three straight years of strong performance, Wall Street experts generally expect the S&P 500 to keep climbing this year. But questions remain. The U.S. dollar has struggled recently while safe investments like gold and silver keep hitting new highs.

Jim Hagerty, CEO at Bartlett Wealth Management, told his main lesson from the past year is that investors need to stay disciplined.

“When markets have been really good, or occasionally when they’re scary, it can tempt people away from their disciplines,” Hagerty said. “I would just emphasize: stay disciplined.”

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