Donald Trump’s second term started out with some early positive momentum, and a fair amount of up and down swings in the stock market. The stock market continued a solid start to the year, only to fizzle out almost immediately. Now, it has produced its worst showing in the first year of a new administration since George W. Bush in 2005. It is unpredictable policy changes like the debt ceiling and external economic shocks that are driving this turbulence. Consequently, investors are left wondering what the future market environment will look like.
To illustrate, in 2017 – Trump’s first year in the White House – the S&P 500 reached 62 all-time highs. Plus it had a fantastic total return of 24.1%. Futures markets were concerned about continued U.S.-China tariff uncertainty and cascading global economic factors. By mid-April 2025, they barely avoided entering bear market territory. His reversal came when Trump backed off his bellicose trade rhetoric, proving once again that he alone controls the White House market-boosting mood ring.
Initial Gains and Volatility
When Trump’s second term started, Wall Street was patting Trump on the back—for now—fueled by projections of even more growth. It was against this backdrop that the S&P 500 enjoyed spectacular ascents. That was based on investors’ optimism over artificial intelligence breakthroughs, the prospect of Federal Reserve interest rate cuts and solid corporate earnings. This early shake-up was quickly followed by waves of volatility that alarmed – and ultimately derailed – speculative momentum.
Business Proprietor, Jim Hagerty, CEO at Bartlett Wealth Management, recalled the need for discipline in times so uncertain. As he explained, when markets are doing really well, it starts to tempt folks out of their chosen professions. Walker added that this temptation is especially strong during frightening market times. He emphasized that investors need to stay focused on long-term plans. This focus is important because as they steer through their own near-term challenges presented by a rapidly evolving market landscape,
“I would just emphasize: stay disciplined. And given how strong things have been, take a careful look at your asset allocation, make sure it’s suitable and rebalance if necessary.” – Jim Hagerty
Policy Whiplash Impacts the Market
The Trump administration has been characterized by rapid policy changes that have created what many analysts describe as “policy whiplash.” This type of unpredictability makes it even more difficult for investors to plan their strategies as quick changes could affect market liquidity. Tim Thomas, a financial strategist with the American Public Transportation Association, underscored the burden that this uncertainty has created.
“There is a lot of policy uncertainty out there. Policy uncertainty is hard to invest around, because, by its very nature, it can change in an instant.” – Tim Thomas
This new environment has led many strategists to reposition client portfolios for a more defensive posture. The volatility has led many to recommend caution and preparedness for sudden market changes, urging investors to consider hedging their positions.
Looking Ahead
Even after enduring the twists and turns of a hypothetical second Trump term, optimism continues to pervade among a segment of market participants. Take advantage of recent trends. International stocks have outperformed U.S. stocks, reversing years of underperformance. More broadly, this shift indicates another momentous change in global investor sentiment. Additionally, Trump signed the “One Big Beautiful Bill Act” into law during the summer, aimed at stimulating economic growth and potentially stabilizing markets.
Most importantly the S&P 500 rallied fantastically into Trump’s second—inauguration day—term. It fueled consecutive yearly increases above 20% for the first time since the 1990s. This trend is a reflection of underlying economic resilience despite the obstacles we face today. As Tim Thomas discussed, smart investing is always mission number one.
“You need to have some kind of hedge in place.” – Tim Thomas