Trump 1.0 Vs Trump 2.0: How US stocks behaved in the first year of each presidency

The US stock market rallied sharply in the first year of Donald Trump’s first term. His second term has opened with weaker returns, higher volatility and a very different macro backdrop.

• Trump's first term had strong market gains; second term saw volatility, modest growth.
• Higher rates and policy uncertainty have hurt Trump 2.0 market performance.
• Obama's first year had the biggest equity rally; Biden's saw moderate gains.

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Donald Trump has long pointed to the stock market as a real-time referendum on his presidency. But a comparison of the first year of Trump’s first term (Jan 20, 2017–Jan 20, 2018) with the first year of his second term (Jan 20, 2025-present) shows two markedly different market stories, shaped by macroeconomics, valuations and policy.

Using data from Reuters, S&P Dow Jones Indices, Nasdaq, and sector benchmarks, the contrast is clear: Trump 1.0 began with a powerful, policy-fuelled rally; Trump 2.0 has so far been defined by uneven gains, higher rates and policy uncertainty.

Trump 1.0: A powerful first-year rally (2017)

Index performance (Jan 20, 2017 – Jan 20, 2018) According to S&P Dow Jones Indices and Reuters:

S&P 500: up aprox. 23 percent

Dow Jones Industrial Average: up aprox. 30 percent

Nasdaq Composite: up aprox. 32 percent

This was one of the strongest first-year performances for U.S. equities under any modern president.

What drove the rally?

1. Tax policy optimism

Markets rallied on expectations, and eventual passage, of the Tax Cuts and Jobs Act, signed into law in December 2017. Corporate tax rates were slashed from 35 percent to 21 percent, boosting earnings expectations almost immediately.

2. Low interest rates, easy financial conditions

The Federal Reserve was tightening only gradually. The 10-year Treasury yield stayed mostly below 2.6 percent during 2017, supporting equity valuations.

3. Strong global growth

Synchronised global growth in 2017 lifted corporate profits, trade volumes and risk appetite, according to IMF and World Bank data cited by Reuters.

Sector standouts in Trump 1.0’s first year

• Technology: Massive outperformance, led by Apple, Amazon, Microsoft and Facebook
• Financials: Benefited from deregulation expectations and rising rates
• Industrials: Lifted by infrastructure rhetoric and global trade growth

Market volatility was subdued. According to Reuters, the VIX index averaged near historic lows, reinforcing a 'risk-on' environment.

Trump 2.0: a choppier start (2025–present)

Index performance (Jan 20, 2025 – early 2026) Based on Reuters market data:

S&P 500: low-to-mid single-digit gains, with sharp drawdowns

Dow Jones: modest gains, lagging broader indices

Nasdaq: volatile, with tech leadership less consistent

Unlike Trump 1.0, gains have not been linear and have been repeatedly interrupted by macro shocks.

What’s different this time?

1. Higher interest rates

The Federal Reserve entered Trump’s second term with policy rates at multi-decade highs following the post-pandemic inflation cycle. According to Reuters citing Fed commentary, higher discount rates have compressed equity valuations, especially in growth stocks.

2. Elevated starting valuations

US equities entered 2025 after multiple years of double-digit returns. Unlike 2017, markets were not cheap. As Manulife Investment Management told Reuters, 'everything was priced close to perfection.'

3. Policy uncertainty rather than policy clarity

Trump 1.0 began with a clear pro-business legislative agenda. Trump 2.0 has so far been marked by frequent policy signals, particularly on trade and fiscal issues, without equivalent legislative follow-through, unsettling markets at intervals.

Sector performance in Trump 2.0’s first year

• Technology: Mixed performance; AI leaders strong, broader tech volatile
• Energy: Benefited from geopolitical risk and supply concerns
• Defence: Outperformed amid higher global security spending
• Financials: Pressured by yield volatility and regulatory uncertainty

Volatility has been materially higher. The VIX has repeatedly spiked, reflecting greater sensitivity to policy headlines.

How Trump’s first year compares with Obama and Biden

According to data compiled by S&P Dow Jones Indices, Nasdaq and Reuters, US equities surged in the first year of Barack Obama’s presidency (January 2009–January 2010), rebounding sharply from the global financial crisis. The S&P 500 rose about 53 percent, the Dow Jones Industrial Average gained roughly 47 percent, and the Nasdaq Composite climbed around 62 percent, helped by ultra-loose monetary policy, emergency fiscal support and depressed starting valuations.

Under Joe Biden’s first year in office (January 2021–January 2022), equities posted more moderate gains. The S&P 500 rose roughly 15 percent, the Dow gained about 13 percent, and the Nasdaq added around 10 percent, supported early on by massive pandemic-era fiscal stimulus but weighed down later by rising inflation and the prospect of tighter monetary policy, according to Reuters and Nasdaq data.

Trump’s first term benefited from low rates, global growth and pent-up post-crisis optimism. His second term began in a world of higher debt, higher rates, geopolitical fragmentation and stretched valuations.