From a purely statistical standpoint, Wall Street has loved having Donald Trump in the White House. During his first, non-consecutive term, the ageless Dow Jones Industrial Average (DJINDICES: ^DJI), benchmark S&P 500 (SNPINDEX: ^GSPC), and tech-inspired Nasdaq Composite (NASDAQINDEX: ^IXIC) rallied by 57%, 70%, and 142%, respectively.
While it’s normal for the major stock indexes to rise under a sitting president, annualized gains observed under Trump are higher than most other presidents since the late 1890s.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
This outperformance has continued into the president’s second term. Since Trump’s inauguration on Jan. 20, 2025, the Dow, S&P 500, and Nasdaq Composite have risen by 18%, 24%, and 32%, respectively. These gains have been powered by the evolution of artificial intelligence (AI), record S&P 500 share buybacks in 2025, and better-than-expected corporate earnings.
But no bull market is indefinite. More than 150 years of historical data strongly suggest the Trump bull market is near its tipping point — and substantial downside may await.
Wall Street is on the verge of doing something not witnessed in 155 years
Though several catalysts can upend the Trump bull market, arguably none is more pressing than stock market valuations.
“Value” is something of a tricky subject, given that there’s no one-size-fits-all way to evaluate and value public companies or the broader market. What one investor views as expensive might be considered a bargain by another. The emotional and subjective nature of valuations is one of the factors that makes predicting short-term directional movements in the broader market so challenging.
However, one time-tested valuation tool has a knack for side-stepping subjectivity: the S&P 500’s Shiller Price-to-Earnings (P/E) Ratio, also known as the Cyclically Adjusted P/E Ratio (CAPE Ratio).
What separates the Shiller P/E from the traditional P/E ratio is time. Whereas the latter only accounts for 12 months of trailing earnings per share (EPS) and can therefore lose its usefulness during recessions if EPS turns negative, the Shiller P/E is based on average inflation-adjusted EPS over the previous 10 years. Even during recessions, the Shiller P/E remains useful.
