If you’ve spent any time looking at a 401(k) lately, you know the vibe. It’s been a wild ride. Honestly, trying to track the connection between the White House and Wall Street feels a bit like watching a high-stakes poker game where the rules change every time a new tweet or "Truth" drops. We’re currently sitting in January 2026, and looking back at the last year and a half, the relationship between The Stock Market Under Trump and actual policy has been anything but predictable.
Some people expected a total moon mission for stocks the second he took office again. Others braced for a 1929-style collapse. Neither side got exactly what they wanted. Instead, we’ve had this strange, jagged climb marked by massive "tariff tantrums" and equally massive "tax cut rallies."
The 2025 Roller Coaster: From Liberation Day to Now
Basically, the market spent most of 2025 in a state of whiplash. Remember "Liberation Day" back in April? Trump announced those reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA), and for a minute there, it looked like the wheels were coming off. The S&P 500 took a 20% dive in just seven weeks. You could practically hear the collective gasp from retail investors.
But then, something shifted.
The administration did what it does best—it pivoted. They paused the most aggressive tariffs and started talking bilateral deals. By the time the "One Big Beautiful Bill Act" passed in July, extending the 2017 tax cuts, the mood flipped. Investors stopped panic-selling and started buying the dip. Between that April bottom and the end of 2025, the S&P 500 surged nearly 40%.
It’s been a "show me the money" kind of environment. Corporate earnings stayed surprisingly resilient, growing around 9% to 12% through the year. Even with all the noise, the S&P 500 gained over 15% from Inauguration Day through early January 2026. If you compare that to his first term, it’s actually trailing slightly—back in 2017, the gain was 21% over the same period.
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What’s Actually Driving the Numbers?
It isn't just one thing. It's a messy cocktail of deregulation, tax policy, and a very public feud with the Federal Reserve.
- The Tax Cut Extension: Making the 2017 provisions permanent was a massive booster shot for corporate margins. Goldman Sachs analysts noted that while tariffs were a headwind, the tax legislation likely boosted corporate earnings by $100 billion in 2025 alone.
- The Tariff Reality Check: This is where it gets complicated. We’ve seen effective tariff rates hit about 12%, and they might climb to 14.4% this year. For companies like Apple or Nvidia that rely on global supply chains, this is a nightmare. But for small-cap domestic companies? They’ve actually outperformed in some stretches because they aren't as exposed to the trade war drama.
- The Powell Problem: President Trump hasn’t exactly been quiet about his thoughts on Fed Chair Jerome Powell. There was even talk of firing him before his term expires in May 2026. The Fed cut rates three times in late 2025, which the market loved, but the tension keeps everyone on edge.
Small Caps and the "America First" Trade
One of the most interesting things about The Stock Market Under Trump this time around is the broadening of the rally. In 2024, it was all about the "Magnificent 7" and AI. But in 2025, smaller companies (tracked by the Russell 2000) started catching up, rising about 13%.
Why? Because investors are betting that deregulation and "Buy American" incentives will help the little guys more than the tech giants who are currently in the crosshairs of trade negotiations.
The Truth About DJT and "Meme" Investing
We have to talk about Trump Media & Technology Group (DJT). Honestly, this stock behaves like nothing else on the exchange. It’s essentially a barometer for political sentiment rather than a business with traditional fundamentals.
By early 2026, DJT was trading around $14 to $15 a share. It’s been incredibly volatile—down 60% over the last year, yet it saw a 14.7% surge in December 2025 alone. The company has tried to reinvent itself, announcing moves into nuclear fusion (acquiring TAE Technologies) and even distributing crypto tokens to shareholders in partnership with Crypto.com.
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Most serious analysts, like those at GuruFocus, argue you can't value DJT using P/E ratios because, well, the math doesn't work. It’s a "story stock." If you’re holding it, you’re not betting on earnings; you’re betting on the man himself.
Looking Ahead to the 2026 Midterms
We’re now entering a midterm election year. Historically, these are "meh" years for stocks. The S&P 500 fell in both 2018 (Trump’s first midterm) and 2022 (Biden’s midterm).
There’s a massive "X factor" looming right now: The Supreme Court. They’re expected to rule any day now on whether the administration’s 2025 tariffs were even legal. If the Court strikes them down, the government might have to reimburse nearly $192 billion in collected duties. That sounds like a win for companies, but it would also blow a hole in the federal budget and could send the dollar into a tailspin.
Sector Winners and Losers
If you're trying to figure out where to park your cash, the landscape is pretty divided.
The Winners:
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- Traditional Energy: The "drill, baby, drill" mantra is back in full force. While the IEA warns that this could lead to a massive supply glut and crash oil prices by 2035, in the short term, the removal of environmental regulations has been a boon for domestic producers.
- Finance: Banks are loving the lighter regulatory touch. Higher-for-longer interest rates (thanks to tariff-induced inflation) also help their net interest margins.
- Defense: Spending is up. It’s one of the few areas where there’s bipartisan agreement on cutting checks.
The Losers:
- Retailers: Anyone importing clothes or electronics is feeling the squeeze. Companies like Walmart and Target are having to decide whether to eat the tariff costs or pass them to you at the checkout counter.
- Multinational Tech: Trade friction with China isn't just about chips; it's about access to the world’s second-largest consumer market.
The Bottom Line for Your Money
Navigating The Stock Market Under Trump requires a thick skin and a lot of diversification. The "Trump Trade" isn't a straight line up; it's a series of explosive rallies followed by sharp corrections whenever a new trade barrier is proposed.
Honestly, the biggest risk right now isn't the policy itself—it's the uncertainty. Markets can price in a 10% tariff. What they can't price in is a tariff that gets announced on Tuesday, paused on Thursday, and reinstated on Sunday.
Actionable Insights for 2026:
- Check Your Tech Exposure: If your portfolio is 90% AI and Big Tech, you're heavily exposed to trade war volatility. Consider balancing with domestic-focused industrials or financials.
- Watch the Fed in May: Powell’s term ending is a huge milestone. If Trump appoints a "dove" who wants to slash rates regardless of inflation, expect gold and crypto to take off while the dollar weakens.
- Don't Trade the Headlines: Most of the "tariff panic" in 2025 resulted in quick rebounds. If you sold in April during the Liberation Day dip, you missed a 40% run-up.
- Mind the Debt: The CBO projects the current tax and spending path will add $3.4 trillion to the national debt over ten years. Long-term, this could put upward pressure on bond yields, making "safe" investments more attractive than risky stocks.
The bull market is still breathing, but it’s getting older and the air is getting thinner. Staying invested is usually the right move, but having some cash on the sidelines for the next "tariff tantrum" might be the smartest play you make this year.