US Stock Market Posts Weakest First-Year Performance Under Trump in Two Decades as Volatility Peaks in 2026
- How Did US Markets Perform in Trump’s First Year Back?
- Why Did Foreign Markets Outshine US Stocks?
- Tariff Whiplash: How Policy Chaos Rocked Markets
- What Drove the Late-Year Rebound?
- Can the Rally Survive Midterm Election Jitters?
- Expert Takeaways for 2026
- FAQ: Your 2026 Market Questions Answered
The S&P 500’s 13.3% gain during Trump’s first year of his second term marks the weakest presidential market debut since George W. Bush in 2005—far below his own 24.1% record in 2017. Despite AI-driven rallies and a late-year rebound from tariff chaos, historic VIX spikes and foreign market outperformance signal a turbulent 2026 ahead. Analysts debate whether the "One Big Beautiful Bill Act" stimulus can sustain momentum ahead of midterm elections.
How Did US Markets Perform in Trump’s First Year Back?
Between inauguration day and January 20, 2026, the S&P 500 climbed 13.3%—a solid return by most standards, but thefor any president since Bush’s second term began in 2005. This pales next to Trump’s own 24.1% surge during his 2017 debut. "The market was already sprinting when TRUMP took office," notes BTCC chief analyst Mark Chen, referencing back-to-back 20% annual gains pre-2025. "Expectations were sky-high, and even AI enthusiasm couldn’t match prior fireworks."
Why Did Foreign Markets Outshine US Stocks?
For the first time in years, international equitiestheir US counterparts in 2025. The MSCI EAFE Index gained 18.2% versus the S&P’s 13.3%, fueled by weaker dollar trends and catch-up plays in emerging tech hubs. "Investors chased value abroad while US valuations stretched," explains DataTrek’s Nick Colas. The shift was stark—since 2020, US markets had consistently led global rallies.
Tariff Whiplash: How Policy Chaos Rocked Markets
April 2025 saw markets(-19.8% drop) after Trump floated sweeping tariffs on EU goods, only to reverse course days later. The VIX fear index spiked to 51—matching pandemic peaks—before calming when tariffs were shelved. "That 72-hour panic showed how quickly Trump’s trade tweets can override fundamentals," says Miller Tabak’s Matt Maley. The S&P still managed 39 record closes, though trailing the 62 notched in Trump’s first term.
What Drove the Late-Year Rebound?
Three factors saved 2025’s rally:(Nvidia up 140%), Fed rate cut hopes, and the $1.2 trillion "One Big Beautiful Bill Act" passed in August. The stimulus package—dubbed "OBBA" by traders—included infrastructure boosts and middle-class tax cuts. "OBBA’s initial rollout explains much of Q4’s 8% surge," confirms Badgley Phelps’ Tim Thomas. Critics argue it merely borrowed growth from 2026.
Can the Rally Survive Midterm Election Jitters?
History suggests caution. Since 1950, second presidential years average just 4.3% S&P gains—the worst of the cycle. With the VIX still hovering NEAR 25 and gold hitting record highs, BTCC’s research team notes: "Investors are hedging despite OBBA’s sugar rush." Key risks include dollar weakness (DXY down 7% in 2025) and Trump’s threat to revive tariffs if re-elected.
Expert Takeaways for 2026
1."Chasing AI stocks or panic-selling during VIX spikes burned many in 2025," warns Bartlett Wealth’s Jim Hagerty.
2.Futures price 3 rate cuts by December—any delay could unravel gains.
3.Since 1936, markets rise 80% of time when incumbent party holds Congress.
FAQ: Your 2026 Market Questions Answered
Was 2025 really a bad year for US stocks?
Not objectively—13.3% beats the 7% historical average. But context matters: coming off two 20% years and Trump’s own 2017 record, it felt underwhelming.
Which sectors outperformed?
AI (up 42%), defense (up 28%), and infrastructure (up 25%) led, while green energy lagged (-3%) after subsidy cuts.
How reliable is the "presidential cycle" theory?
Since 1927, year 2 averages 4.3% returns—but 2025’s OBBA stimulus may defy tradition.
