The stock market’s volatility has always been a major point of speculation for the common masses no matter who’s the President. The stock market is often considered the indicator of any economy. Whenever the stock markets are up trending people tend to appreciate the economy. However, they do not waste time jumping to conclusions whenever they see the market’s downtrend. They start blaming the current President for their economic decisions for the loss incurred through the stock markets.
Although the impact of a President’s decision over the stock market cannot be ignored, it is still wrong to put the entire blame on them. The past few days have been a tough time for the stock market. In such a situation, the most common question being raised is whether the stock market will crash in 2025 under Trump’s Presidency. Let’s address the question with a detailed analysis of the past numbers.
How Strong Were Trump’s First Tenure Results?
In order to understand exactly what another Donald Trump Presidency can mean for the stock markets, it is important to understand how the markets were affected by his first tenure. The cumulative returns of the S&P 500 in 2017-2020 was 83%. This includes one 15% drawdown in 2018 and one 35% drawdown in 2020. If you are actually surprised by these numbers then you shouldn’t be. This data is in line with the stock market returns historical averages. The stock market is often seen going up in the long run along with the earnings of the US-listed companies. However, this always comes with drops mid-way.
Was Trump responsible for the two drops that happened during his tenure? In the late months of 2018, investors expressed their concerns about the Federal Reserve hiking interest rates and its effect on the markets. At that time, the S&P 500 was actually trading at an elevated P/E when compared to the historical averages. The drop in 2020 happened because of the COVID-19 Pandemic which was out of any president’s control.
A Look At The Past Crashes
Since the Great Depression which was around 100 years ago, the stock market has seen 10 major crashes that had huge impacts. The S&P 500 prices faced a drop of around 20% or even more in some of these crashes. If we analyze the numbers, it means the stock market has a probability of crashing one time every ten years. However, these crashes may not be according to the exact increments. We can consider this point to determine whether the stock market will crash under Trump’s Presidency. It is pretty clear that there is a 1-in-10 probability of the market crashing under Trump’s Presidency.
How Was The S&P 500 Performing Under The Former Presidents of the United States?
The following table depicts the performance of the S&P 500 under various Presidents of the United States of America.
| President | Years of Office | S&P 500 Annualized Return |
| Dwight Eisenhower | 1957-1961 | 7.8% |
| John Kennedy | 1961-1963 | 5.4% |
| Lyndon Johnson | 1963-1969 | 7.6% |
| Richard Nixon | 1969-1974 | (4.1%) |
| Gerald Ford | 1974-1977 | 10.4% |
| Jimmy Carter | 1977-1981 | 6.3% |
| Ronald Reagan | 1981-1989 | 10.2% |
| George Bush | 1989-1993 | 10.9% |
| Bill Clinton | 1993-2001 | 15.2% |
| George W. Bush | 2001-2009 | (6.2%) |
| Barack Obama | 2009-2017 | 13.8% |
| Donald Trump | 2017-2021 | 14.1% |
| Joe Biden | 2021-2025 | 11.7% |
What Do Market Analysts Think About The Situation?
Some of the major market analysts think that the stock market will continue to soar high during Trump’s second tenure. The reason for this is the disregulation as well as the tax cuts he has proposed for his second tenure. During his election campaign, Trump proposed cutting the corporate tax rate to 15% for domestic manufacturers.
However, if we look at the latest updates, Trump has confirmed the imposition of tariffs on goods imported from China, Canada, and Mexico. He also proposed large-scale deportations of illegal migrants. All these factors may worsen inflation.
Is a Stock Market Crash Probable Under Trump’s Presidency In 2025?
The S&P 500 is currently trading at P/E 21.6. If we analyze the past year’s performances of the S&P 500 under all the presidents, it is clear that there is approximately a 10% chance of the market going under a 20% crash each year. This does not include the starting prices of stocks which should also be considered while analysing stocks in 2025. The average S&P 500 PE almost touches 30 which means the stock market will likely fall in 2025.
Investments in the stock market are always subject to market risks. We just witnessed one of the largest companies in the world, Nvidia, have a severe crash because of the fear of disruptions. Hence, anything can happen in the 12 long months of 2025.
Do Presidents Even Have Any Connections With Stock Market Crashes?
The presidents do not have any control or power over the starting valuations of any stocks when they enter office. Yes, the major economic decisions and conflicts may likely have an impact on the stock markets. Besides that, the presidents do not really have any connections with the stock market crashes. The president cannot control the performance of any particular stock in the long run. Even if they take credit for the performances in their political speeches, their impact is highly unlikely.
