Since the late 1890s, the ageless Dow Jones Industrial Average (^DJI 0.16%) or benchmark S&P 500 (^GSPC +0.80%) have risen in 26 of the last 33 presidential terms. But under President Donald Trump, annualized returns for the Dow, S&P 500, and growth-stock-driven Nasdaq Composite (^IXIC +1.63%) have been higher than most other presidents.
During Trump’s first term (Jan. 20, 2017 – Jan. 20, 2021), the Dow, S&P 500, and Nasdaq gained 57%, 70%, and 142%, respectively. These widely followed indexes have rallied 14%, 19%, and 25%, respectively, since Trump’s second, non-consecutive term began (through April 17).
President Trump delivering remarks. Image source: Official White House Photo by Shealah Craighead, courtesy of the National Archives.
While there are plenty of catalysts fueling these double-digit returns, there’s also growing skepticism that equities can continue their parabolic climb. It has some investors wondering whether a stock market crash is brewing under President Trump.
Though no forecasting tool or correlated event can ever guarantee what’s to come on Wall Street, one predictive tool that has 155 years of historical data in its sails provides a clear outlook for the Dow, S&P 500, and Nasdaq.
Why have stocks generated outsize returns under Donald Trump?
But before we look to the future, we have to spend some time digging into the past. Once the foundation of this outsize rally in stocks under Donald Trump has been explained, we can better understand what’s to come for Wall Street.
The first thing to recognize is that these double-digit annualized gains aren’t entirely tied to actions taken by Trump. For example, the rise of artificial intelligence (AI) and the advent of quantum computing were underway before Trump took office for his second term.
The global addressable opportunity for these game-changing technologies is massive. PwC analysts foresee AI creating $15.7 trillion in worldwide economic value by 2030, while Boston Consulting Group estimates quantum computing will create up to $850 billion in global economic value by 2040. If these lofty forecasts are even remotely accurate, there should be a laundry list of winners.
75% SPX EPS beat rate
65% sales beat rate
11.9% Q4 blended EPS growth rate @factsetS&P 500 Reporting Double-Digit Earnings Growth for 5 th Straight Quarter pic.twitter.com/t5VG2lOcSt
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) January 30, 2026
Additionally, quarterly operating results for S&P 500 companies have consistently outpaced analysts’ expectations. Though the bar is historically set low enough that profit beats are commonplace, better-than-expected operating results have helped power Wall Street’s major stock indexes to new heights.
However, these outsize stock returns do have President Trump’s fingerprints on them to some degree. Trump’s flagship tax and spending law from his first term, the Tax Cuts and Jobs Act (TCJA), permanently lowered the peak marginal corporate income tax rate from 35% to 21% (the lowest corporate income tax rate since 1939).
Since Donald Trump signed the TCJA into law in December 2017, share buybacks by S&P 500 companies have reached record levels. According to research by The Motley Fool, aggregate share buybacks by S&P 500 companies likely topped $1 trillion for the first time in 2025.
Now that the foundation has been laid for Trump’s bull market, let’s take a closer look at what more than 150 years of history has to say about the chances of a stock market crash taking shape.
Image source: Getty Images.
This valuation tool has an immaculate track record of foreshadowing big moves for stocks
Though several headwinds suggest the stock market is in trouble, perhaps none echoes louder than the S&P 500’s Shiller Price-to-Earnings (P/E) Ratio, which is also referred to as the Cyclically Adjusted P/E Ratio (CAPE Ratio).
Valuation can be a tricky subject on Wall Street. What one investor finds pricey might be considered a bargain by another. The lack of a one-size-fits-all blueprint for valuing stocks or the broader market makes short-term directional movements incredibly hard to predict with any long-term accuracy.
Another challenge with valuing public companies and/or the broader market is the limitations of investors’ favorite valuation tool, the P/E ratio. Since the traditional P/E ratio only accounts for trailing 12-month earnings, a recession or shock event can render it useless.
This is where the Shiller P/E and its extensive back-tested history can be helpful.
The CAPE Ratio is based on average inflation-adjusted earnings from the previous 10 years. Whereas recessions can trip up the traditional P/E ratio, this isn’t the case with the S&P 500’s Shiller P/E. It provides the closest thing investors will get to a true apples-to-apples valuation comparison on Wall Street.
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
Although economists didn’t introduce the Shiller P/E until the late 1980s, it’s been back-tested to January 1871. Over these 155 years, it’s averaged a multiple of 17.36, through April 18, 2026. But for the better part of the previous seven months, the CAPE Ratio has been oscillating between 39 and 41, making this the second-priciest stock market in history.
If there’s a silver lining for optimists, it’s that the Shiller P/E isn’t a timing tool. In other words, it’s not going to tell investors when the music will stop or how steep the Dow Jones Industrial Average, S&P 500, or Nasdaq Composite might tumble.
However, the Shiller P/E does have an uncanny track record of foreshadowing significant downside in equities when it crosses an arbitrary line in the sand. A multiple of 30 (or above) during a continuous bull market has historically foreshadowed a significant decline.
Including the present, the CAPE Ratio has surpassed 30 on six occasions over the previous 155 years. The Dow, S&P 500, and/or Nasdaq Composite have fallen by 20% to 89% following these occurrences. In short, history is telling us that when valuations become extended, it’s not a matter of if Wall Street’s major stock indexes will fall hard — it’s a matter of when.
To reiterate, the current Shiller P/E of 40.44 (as of April 17) doesn’t guarantee that a stock market crash will occur. But based on extensive history, it does point to a heightened probability of a stock market crash under President Trump in the presumed not-too-distant future.
