Everyone had a theory. Back in late 2024, if you turned on any news station, you’d hear talking heads screaming about how the 2024 election would either send the stock market to the moon or straight into a ditch. Now that we’ve lived through 2025, we can finally stop guessing and look at what actually went down.
Honestly, it was a wilder ride than most of us expected. We didn't just get a "business as usual" market; we got a massive rollercoaster that featured a spring-time crash, a "Liberation Day" tariff shock, and a late-year surge that pushed the S&P 500 toward heights few thought possible. If you’re trying to understand how will the 2024 election affect the stock market in the long run, you have to look at the tug-of-war between aggressive trade policy and massive corporate tax cuts.
The 2025 Rollercoaster: From "Liberation Day" to Record Highs
The year started with a bang. Shortly after the inauguration in January 2025, the market initially cheered for the return of "Trumponomics." But then came April 2nd—a day the administration dubbed "Liberation Day."
The announcement of sweeping, reciprocal tariffs on dozens of countries sent global markets into a tailspin. By mid-April 2025, developed market equities had plummeted about 16.5%. It felt like the wheels were coming off. People were panic-selling, and the word "stagflation" was everywhere.
But the market has a short memory.
By May 13, 2025, after the administration paused some of the most aggressive tariff hikes to negotiate, the S&P 500 turned positive for the year. By the time we hit Christmas Eve, the index reached an all-time high of 6,932.05. It was a 17.9% total return for the year—a far cry from the doom-and-gloom predictions of a multi-year depression.
Winners and Losers: The Policy Shift Effect
The 2024 election didn't move every stock in the same direction. It was a year of "haves" and "have-nots."
The Tech Titans and AI Mania
Despite the trade wars, Big Tech didn't just survive; it thrived. Microsoft, Broadcom, and Nvidia were basically the three engines keeping the entire market plane in the air. Nvidia alone was responsible for 15.5% of the S&P 500's total gains in 2025. This wasn't just about the election—it was about the $437 billion that seven large tech firms poured into AI data centers. The election provided the regulatory "light touch" that let these companies run wild, but the AI boom provided the actual cash.
Financials and Energy: The Policy Darlings
If you held bank stocks or traditional energy, you probably had a good year. The 2024 election results brought a wave of deregulation. Banks benefited from the rolling back of Basel III regulations, and oil and gas companies saw a much easier path for drilling permits. The Financials sector saw a solid 15% return in 2025, fueled by the hope that the "One Big Beautiful Bill Act" would keep corporate taxes low indefinitely.
The Clean Energy Struggle
On the flip side, the transition to green energy hit a wall. While some renewable projects remained cost-effective on an "unsubsidized basis," the uncertainty surrounding EV tax credits and green subsidies led to a massive rotation out of solar and electric vehicle stocks.
Why the "One Big Beautiful Bill Act" Matters
A lot of the 2025 gains can be traced back to one specific piece of legislation. The administration pushed through a massive tax and regulatory package that extended the 2017 tax cuts and added new incentives for domestic production.
According to the Congressional Budget Office, this bill is expected to add about $3.4 trillion to the federal debt over the next decade. For a stock investor, that’s a double-edged sword. In the short term, it boosted corporate earnings by roughly $100 billion in 2025. It’s why the market was able to "shrug off" the higher interest rates and tariff drama. But for the bond market? It was a mess. 10-year Treasury yields were jumping all over the place, hitting 4.8% in early 2025 before settling back down near 4.0%.
The Fed's Tightrope Walk
You can't talk about the election's impact without talking about Jerome Powell and the Federal Reserve. Throughout 2025, the Fed was in a weird spot. They had to deal with the inflationary pressure of tariffs while trying to prevent the labor market from cooling too fast.
They ended up cutting rates by 75 basis points in the second half of 2025. This was a massive relief valve for the market. When the Fed signals that they're willing to support growth even in the face of messy trade policy, investors tend to buy the dip.
Real-World Nuance: What Most People Missed
It's easy to say "the election made the market go up." But it's more complicated than that.
One of the big surprises of 2025 was how well international markets performed despite the "America First" rhetoric. Korean equities, for example, saw returns of over 100% in US dollar terms. Why? Because while the US was focused on internal policy, global investors were chasing the AI supply chain wherever it led—which often meant Seoul or Taipei.
Also, the "Trump Trade" wasn't a straight line. The volatility in 2025 was nearly double what we saw in 2024. If you were a day trader, you loved it. If you were a retiree watching your 401(k) drop 20% in April, you were probably losing sleep.
What's Next for Your Money?
So, how will the 2024 election affect the stock market as we head into 2026? History tells us that the second year of a presidential term is usually the most volatile. We’ve already seen that play out.
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The "honeymoon phase" of new legislation is mostly over. Now, we’re entering the "heavy lifting" phase. We have to see if the tariff-driven inflation actually starts hitting consumer wallets or if corporate America can keep absorbing the costs.
Actionable Insights for the Path Ahead:
- Watch the Effective Tariff Rate: Analysts expect it to settle between 10% and 15%. If it creeps higher, consumer discretionary stocks (think retailers and appliance makers) could get hammered.
- Keep an Eye on the Fed Chair: As we move through 2026, the discussion about who will lead the Fed next will create significant ripples in the bond market.
- Diversify Beyond AI: Yes, tech led the way in 2025, but the "One Big Beautiful Bill" has made value stocks and financials much more attractive on a fundamental basis.
- Don't Fear the Volatility: The April 2025 crash proved that the market can recover quickly from policy shocks if the underlying earnings are strong.
The bottom line is that the 2024 election didn't break the stock market—it just changed the rules of the game. We've moved from a world of low interest rates and global cooperation to a world of fiscal stimulus and trade friction. It's a "risk-on" environment, but one that requires a much thicker skin than we needed in the 2010s.
Next Steps for Investors:
- Review your exposure to companies with heavy supply chain reliance on China, Mexico, or Canada.
- Rebalance your portfolio to ensure you aren't over-leveraged in "Green Energy" names that rely on sunsetting subsidies.
- Check your bond duration; with the deficit expanding, long-term Treasuries are no longer the "safe haven" they used to be.