AI Rally and Volatility Define Stock Run Since Trump’s Return

(Bloomberg) — Donald Trump’s re-election was supposed to deliver a booming stock market. It’s done that, just not for the reasons prognosticators anticipated.

The S&P 500 Index has surged 18% since Trump’s Nov. 5 win, ending October on a six-month winning streak and at an all-time high. The run started on expectations an economic boom would follow Trump’s plan to slash taxes and regulations.

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While he has largely delivered the cuts, his attempts at a wholesale re-write of US trade policies, often in fits and starts, are the market narrative he’s most responsible for. Tariff threats and walkbacks have sent a measure of policy uncertainty to the highest since 1900, and equity volatility has episodically spiked, most notably in April when Trump unveiled the harshest levies in 90 years.

“This was one of the most dramatic explosions of market volatility we’ve really ever seen,” said Dean Curnutt, CEO and founder of Macro Risk Advisors LLC.

If not for another bout of artificial intelligence euphoria, the stock market’s advance would be far more muted. Big Tech accounts for a big chunk of the gains, while old-line industrial firms and sellers of consumer products have languished amid tariffs and a slowing economy.

A version of the S&P 500 that strips out market-cap bias is up just 5.2% in the year, underscoring the impact of Big Tech and AI. The median stock in the index has notched a gain of just 1.2%.

Aside from a January blip around China’s DeepSeek app, AI euphoria has minted Nvidia Corp. as the first $5 trillion company and pushed Apple Inc. and Alphabet Inc. past $4 trillion. The seven biggest tech companies account for more than half of the market’s advance.

“I feel like we’ve all jumped on the AI trade,” said Alonso Munoz, chief investment officer at Hamilton Capital Partners LLC, describing investors’ belief that the technology is in the early stages of “leapfrogging into more advancements,” and leaving other segments of the market behind. He sold off investments in more defensive sectors in April during the turmoil, to buy bigger stakes in AI-related firms, including Alphabet Inc.

While the AI rally tore ahead, policy-fomented volatility continued to flare, largely around tariff threats. Trump also sparked rallies and routs in individual companies and industries.