President Donald Trump Just Made Dubious Stock Market History
For more than a century, no asset class has delivered a higher average annual return than stocks. But this doesn't mean the stock market moves from Point A to B in a straight line.
Over the last six weeks and change, the iconic Dow Jones Industrial Average (DJINDICES: ^DJI), widely followed S&P 500 (SNPINDEX: ^GSPC), and growth-centric Nasdaq Composite (NASDAQINDEX: ^IXIC) have taken the elevator lower.
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Since Feb. 19, which is when the S&P 500 hit its all-time closing high, the Dow Jones, S&P 500, and Nasdaq Composite have respectively tumbled by 9.2%, 12.2%, and 17.5%. You'll note the double-digit percentage declines in the S&P 500 and Nasdaq places both firmly in correction territory, with the Dow Jones not too far behind.
President Trump giving remarks on his Liberation Day tariffs. Image source: Official White House Photo.
These not-so-subtle moves lower are particularly surprising given how strong the stock market closed out President Donald Trump's first term in office. When the curtain closed on Jan. 20, 2021, the Dow, S&P 500, and Nasdaq Composite had gained 57%, 70%, and 142%, respectively. Trump's preference for industry deregulation, coupled with his desire to lower the peak marginal corporate income tax rate, pointed to another investor-friendly environment.
But through Trump's first two months in the White House, the only thing he's accomplished on Wall Street is securing his place in a dubious history.
President Trump just made stock market history -- and not in a good way
Stock market corrections are a normal, healthy, and inevitable part of the investing cycle. Think of these downdrafts as the price of admission for growing your invested assets over the long run. For the most part, every president endures a stock market correction during their tenure.
However, President Trump stands alone when it comes to overseeing the fastest 10% downturns from a 52-week high in the S&P 500 since 1950.
Based on data aggregated from Bloomberg by independent financial research company Fundstrat, the fastest 10% corrections from a 52-week high over the last 75 years in the S&P 500 are:
- Feb. 19, 2020 to Feb. 27, 2020 (8 calendar days) / President Donald Trump.
- Jan. 26, 2018 to Feb. 8, 2018 (13 calendar days) / President Donald Trump.
- June 12, 1950 to June 29, 1950 (17 calendar days) / President Harry S. Truman.
- Sept. 23, 1955 to Oct. 11, 1955 (18 calendar days) / President Dwight D. Eisenhower.
- Feb. 19, 2025 to March 11, 2025 (20 calendar days) / President Donald Trump.
Although the latest 10% plunge in the benchmark S&P 500 of 20 calendar days is actually a three-way tie: Presidents Bill Clinton and Jimmy Carter also endured 20-calendar day drawdowns from a 52-week high during their terms. But Trump is the only president to oversee three double-digit percentage moves lower in the benchmark index in 20 or fewer calendar days.
Admittedly, the COVID-19 pandemic in February 2020 was a unique circumstance that no president could see coming or necessarily avoid. However, the declines in 2018 and 2025 do have potential ties to the Trump administration. The 2018 downturn was spurred by concerns of higher inflation and an increase in interest rates. As for the current correction, investors are clearly worried about the president's "Liberation Day" tariff announcements.
On April 2, Trump unveiled a laundry list of global tariffs, as well as reciprocal tariffs against countries that have historically had trade imbalances with the U.S. These reciprocal tariffs target a number of countries that play a critical role for the technology sector and retail/apparel industries. Perhaps it's no surprise that the Atlanta Fed's GDPNow model is forecasting a contraction of 2.8% in first-quarter gross domestic product (GDP), as of its April 3 update.
Then again, with the stock market entering 2025 at its third-priciest valuation in 154 years, and Trump inheriting the priciest market of any president, this double-digit percentage move lower for the S&P 500 and Nasdaq Composite is, perhaps, not all that surprising.
Image source: Getty Images.
Donald Trump's dubious honor can be investors' moment to shine
While investors might not be thrilled with President Trump's tariff policies or Wall Street's reaction through the early stages of his second term, one thing that's a veritable certainty is that the latest elevator move lower in the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite provides an opportunity for long-term investors to shine.
As noted, stock market corrections are normal, healthy, and inevitable. No amount of fiscal or monetary policy can prevent these often emotion-driven downturns from occurring every now and then. What's important is maintaining perspective and seeing the forest through the trees.
Coming up on two years ago, in June 2023, researchers at Bespoke Investment Group published a data set on X that compared the length of every bull and bear market in the S&P 500 dating back to the beginning of the Great Depression. This comparison yielded night-and-day differences between bull and bear market cycles.
On one hand, the average bear market endured for 286 calendar days (roughly 9.5 months) since September 1929. In comparison, the typical bull market over this 94-year period stuck around for 1,011 calendar days, or approximately two years and nine months. The nonlinearity of investing cycles has made every stock market correction a buying opportunity for long-term investors.
It's official. A new bull market is confirmed.
-- Bespoke (@bespokeinvest) June 8, 2023
The S&P 500 is now up 20% from its 10/12/22 closing low. The prior bear market saw the index fall 25.4% over 282 days.
Read more at https://t.co/H4p1RcpfIn. pic.twitter.com/tnRz1wdonp
Further confirmation of the power of time and perspective can be seen in an S&P 500 data set from Crestmont Research that looks back more than a century.
Crestmont calculated the rolling 20-year total returns (including dividends) of the S&P 500 dating back to 1900. Even though the S&P didn't officially exist until 1923, researchers were able to track the performance of its components in other major indexes to the start of the 20th century. This research yielded 106 rolling 20-year periods of data (1900 to 1919, 1901 to 1920, and so on, to 2004 to 2005).
What Crestmont's data set showed was that all 106 timelines generated a positive annualized total return. In plain English, if an investor had, hypothetically, purchased an S&P 500 tracking index at any point between 1900 and 2005, and held this position for 20 years, they made money, without fail, every time. Regardless of presidential policies, wars, pandemics, crashes, or bear markets, the S&P 500, inclusive of dividends, has never moved lower over a 20-year period.
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