From a statistical standpoint, President Donald Trump in the Oval Office and outsize stock market returns have gone hand in hand. During his first, non-consecutive term (Jan. 20, 2017 – Jan. 20, 2021), the time-honored Dow Jones Industrial Average (DJINDICES: ^DJI), benchmark S&P 500 (SNPINDEX: ^GSPC), and innovation-propelled Nasdaq Composite (NASDAQINDEX: ^IXIC) gained 57%, 70%, and 142%, respectively.
President Trump’s second term has been something of an encore performance. The Dow reached an all-time high earlier this month, while the S&P 500 and Nasdaq Composite powered to record closes in June.
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A laundry list of catalysts has lifted the broader market to new heights, including the evolution of artificial intelligence (AI), initial public offering euphoria, and record S&P 500 share buyback activity in 2025.
In response to a reporter’s question earlier this month about his personal financial gains, President Trump retorted, “You know why I’m profiting?” Because the stock market’s going up, everybody’s profiting.”
While he’s 100% correct that investors have thrived from a high-flying stock market, historical precedent strongly suggests Trump will regret proclaiming that “everybody’s profiting” in the not-too-distant future.
The second-priciest stock market in history would like a word
At any given time, the stock market has several headwinds threatening to drag it lower. For decades, Wall Street has made a habit of climbing this wall of worry and proving the naysayers wrong. While the long-term outlook for equities remains bright, the near-term isn’t as rosy, based on 155 years of historical valuation data.
To address the elephant in the room, yes, valuations are subjective. Without a one-size-fits-all blueprint for evaluating public companies, what one investor finds pricey might be viewed as a bargain by another. This seemingly limitless approach to evaluating and valuing publicly traded companies is one of the primary reasons it’s so difficult to forecast short-term directional moves in Wall Street’s major stock indexes with any sustained accuracy.
Nevertheless, the S&P 500’s Shiller Price-to-Earnings (P/E) Ratio does a sensational job of cutting through the noise and providing investors with the closest thing they’ll get to an apples-to-apples valuation comparison. You’ll occasionally see the Shiller P/E referred to as the Cyclically Adjusted P/E Ratio, or CAPE Ratio.
