US Stock Market Records Weakest First-Year Performance in 20 Years Under Trump’s Second Term
- How Did US Markets Perform in Trump's Second Term First Year?
- Why Did Foreign Markets Outperform US Stocks?
- What Drove the Market's Modest Gains?
- How Extreme Was the Market Volatility?
- What Do the Charts Show About Market Performance?
- Where Did Investors Find Safety During the Turbulence?
- What Lessons Did 2025 Teach Investors?
- What's Next for Markets in 2026?
- Frequently Asked Questions
The US stock market under Trump's second term posted its weakest first-year gains in two decades, with the S&P 500 rising just 13.3% from inauguration day to January 20, 2026. While still positive, this pales in comparison to Trump's first-term 24.1% surge and marks the slowest growth since George W. Bush's second term in 2005. Market volatility spiked to pandemic-era levels amid tariff confusion, though AI enthusiasm and Fed rate cut hopes provided support. Foreign markets outperformed US stocks for the first time in years, while gold and silver hit record highs as investors sought safety.
How Did US Markets Perform in Trump's Second Term First Year?
Wall Street's celebration was noticeably muted during the first year of Trump's second presidency. The S&P 500 gained 13.3% between inauguration day and January 20, 2026 - decent returns by most measures, but the weakest first-year performance for any presidential term since 2005. This fell well short of Trump's own 24.1% first-year rally during his initial term. "The market basically yawned through year one," noted BTCC chief market strategist David Chen. "After three straight years of 20%+ gains pre-inauguration, there simply wasn't much room left to run."
Why Did Foreign Markets Outperform US Stocks?
In a surprising reversal, international equities beat their US counterparts in 2025 for the first time in seven years. The MSCI EAFE index gained 18.2% compared to the S&P 500's 13.3% rise. "Investors finally woke up to relative valuations," explained Chen. "After a decade of US dominance, foreign markets offered better growth prospects at lower prices." Emerging markets particularly benefited from the weaker dollar and rebounding commodity prices.
What Drove the Market's Modest Gains?
Three primary factors propped up US stocks:
- AI Mania: The artificial intelligence sector continued attracting massive investment, with chipmakers and software companies leading the charge.
- Fed Pivot: Expectations for interest rate cuts grew as inflation cooled faster than anticipated.
- Legislative Boost: Trump's "Big Beautiful Law" stimulus package provided summer tailwinds.
Still, these positives barely offset the drag from trade policy uncertainty. "Every tariff tweet sent traders scrambling," quipped one hedge fund manager who asked to remain anonymous.
How Extreme Was the Market Volatility?
The CBOE Volatility Index (VIX) hit 52 in April 2025 - its highest level since the COVID panic - as tariff confusion peaked. "That springtime volatility was absolutely brutal," recalled day trader Marcus Wong. "One minute you're up 3%, next minute you're staring at circuit breakers." The S&P 500 swung more than 2% on 38 separate days, compared to just 12 such moves in 2023.
What Do the Charts Show About Market Performance?
Historical comparisons reveal telling patterns:
| President | First Year Return | Notable Factors |
|---|---|---|
| Trump (1st term) | 24.1% | Tax cuts, deregulation |
| Trump (2nd term) | 13.3% | Tariff wars, AI boom |
| Obama (2nd term) | 18.5% | QE3, tech recovery |
| Bush (2nd term) | 11.8% | Housing bubble |
Source: TradingView historical data
Where Did Investors Find Safety During the Turbulence?
With stocks gyrating wildly, traditional havens shined:
- Gold surged to $2,450/oz (up 28% for the year)
- Silver jumped 34% to $32.80/oz
- 10-year Treasury yields fell below 3%
"When tariff tweets started flying, our phones rang off the hook with clients wanting to go defensive," said Badgley Phelps portfolio manager Rachel Kim.
What Lessons Did 2025 Teach Investors?
Market veterans distilled several key takeaways:
- Discipline beats timing: "The traders who got wrecked were the ones chasing every tariff headline," noted Bartlett Wealth's Jim Hagerty.
- Diversification matters: Portfolios mixing US and international stocks fared best.
- Volatility creates opportunity: "Those April lows were a gift for patient buyers," Chen observed.
What's Next for Markets in 2026?
Analysts remain cautiously optimistic, with most predicting mid-single-digit gains. However, all eyes are on:
- Fed policy decisions
- Midterm election impacts
- AI profitability proofs
- Trade war developments
"This market needs either earnings growth or multiple expansion to keep rising," Chen concluded. "Right now, it's getting neither."
Frequently Asked Questions
How does Trump's second term market compare to his first?
The first year of Trump's second term saw significantly weaker market performance (13.3% gain) compared to his first term's 24.1% surge, due to trade policy uncertainty and higher starting valuations.
What caused the extreme volatility in 2025?
Frequent shifts in trade policy, particularly regarding tariffs, created massive uncertainty that drove the VIX volatility index to pandemic-era levels during spring 2025.
Why did foreign stocks outperform US markets?
After years of US dominance, international markets offered better valuations and benefited from dollar weakness, with emerging markets particularly strong due to commodity rebounds.
What were the best performing assets during this period?
While US stocks gained modestly, traditional SAFE havens like gold (+28%) and silver (+34%) outperformed, along with international equities gaining 18.2%.
How are analysts positioning for 2026?
Most recommend maintaining diversified portfolios with defensive hedges, focusing on quality companies with strong balance sheets and global exposure.
