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Market performance under Donald Trump and Joe Biden reflects two very different economic environments. In his first term until the pandemic, Trump presided over steady growth and a bull market, with the S&P 500 delivering higher annualized returns. Biden took office during a volatile recovery, facing inflation, rate hikes and global uncertainty. While both saw record highs, returns were stronger on average during Trump’s first term, largely due to favorable conditions before the COVID-19 shock.
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Key Takeaways
- All three major indexes – the S&P 500, Dow and Nasdaq – went up under both presidents, but for different reasons like tech growth under Trump and recovery-driven gains under Biden.
- Trump’s first term saw market gains driven by tax cuts and a growing economy before the COVID-19 pandemic.
- Biden’s term featured more volatility because of the pandemic, but markets still reached highs during the recovery phase.
- Trump’s second term has featured more market risk due to new tariffs, the potential for rising debt and pending policy developments.
Stock Market: Trump vs. Biden
Stock market performance under a president doesn’t occur in a vacuum. Factors like interest rates, global events and investor expectations all shape returns, often independent of policy decisions. Still, comparing key indexes like the S&P 500, Dow Jones Industrial Average (DJIA) and Nasdaq under Trump and Biden reveals distinct trends in investor behavior and sector strength during each term.
During Trump’s first term in office, the S&P 500 increased from approximately 2,271 on Jan. 20, 2017, to about 3,798 by Jan. 20, 2021, marking a gain of around 67% over four years. This period was characterized by corporate tax cuts and deregulation, which supported equity markets. The index experienced volatility during the onset of the COVID-19 pandemic, but recovered swiftly.
The market benefited from economic reopening and stimulus measures but faced challenges from inflation and interest rate hikes. Despite these headwinds, the index reached new highs during this period.
This growth was supported by policies favoring industrial and financial sectors. The index experienced a sharp decline during the early stages of the pandemic but rebounded by the end of his term.
During Biden’s tenure, the DJIA increased from approximately 31,188 to about 43,488 by January 17, 2025, marking a gain of roughly 39.5%. The index benefited from continued economic recovery and corporate earnings growth, though it faced periods of volatility due to monetary policy shifts and global uncertainties.
Under Trump, the Nasdaq Composite surged from about 5,555 to approximately 13,197, more than doubling over four years. This growth was driven by strong performance in the technology sector, supported by low interest rates and robust earnings.
During Biden’s term, the Nasdaq Composite rose from around 13,197 to approximately 19,630 by Jan. 17, 2025, achieving a gain of about 48.7%. The index reached new highs, propelled by continued strength in technology and growth stocks, despite facing challenges from rising interest rates and inflation concerns.
Overall, while all three major indexes experienced gains under both administrations, the magnitude and drivers of these gains varied, reflecting differing economic conditions and policy environments.
For a quick recap, the table below summarizes stock market performance under Trump’s first term vs. Biden’s only term:
| Index | Trump First Term (Jan 2017 – Jan 2021) | Biden Term (Jan 2021 – Jan 2025) |
|---|---|---|
| S&P 500 | Rose from ~2,271 to ~3,798 (+67%) | Reached new highs despite inflation and rate hikes |
| Dow Jones | Declined early in COVID, recovered by term end | Rose from ~31,188 to ~43,488 (+39.5%) |
| Nasdaq | Rose from ~5,555 to ~13,197 (more than doubled) | Rose from ~13,197 to ~19,630 (+48.7%) |
Stock Market Under Trump’s Second Term
President Donald Trump’s second term has introduced significant volatility to financial markets, largely attributed to expansive tariff policies and unpredictable economic strategies. The announcement of broad tariffs on imports led to immediate and substantial declines in major stock indices, with the S&P 500 experiencing a notable drop shortly after the policy’s implementation.
The administration’s approach to trade has been characterized by abrupt policy shifts and a lack of clear economic direction, contributing to investor uncertainty. Analysts have observed that the absence of a coherent economic roadmap has eroded confidence among institutional investors, leading to heightened market volatility.
Economic instability has also extended beyond stocks. Bond investors are uneasy about the new Trump tax plan, which could extend tax cuts without reducing spending. This in turn would lead to more borrowing, bigger deficits and higher yields that can lower the market value of existing bonds, cause losses for current bond investors and make it more expensive for the government to borrow.
Economists warn that the combination of aggressive trade measures and inconsistent policy communication may have negative long-term implications for market stability and economic growth. The potential for retaliatory actions from trade partners and the strain on global supply chains add to the complex challenges facing investors.
In this environment, market participants are advised to exercise caution and closely monitor policy developments. The ongoing interplay between trade strategies and economic indicators continues to influence market dynamics.
Investor Sentiment and Sector Rotation Trends
Sector rotation refers to the shifting of investor capital between different sectors of the economy based on expectations for economic and policy changes. Investors tend to favor certain sectors during periods of growth (like technology or financials) and shift to more stable ones (like healthcare or consumer staples) during uncertainty or downturns. These shifts help reveal how markets interpret current conditions and future outlooks.
During Trump’s first term, investor sentiment was shaped by expectations of pro-business policies. Corporate tax cuts and deregulation led to optimism in cyclical sectors like industrials, financials and energy. At the same time, low interest rates and strong innovation momentum supported continued strength in technology stocks, driving broader market gains.
Under Biden, investor sentiment initially reflected confidence in infrastructure investment and clean energy initiatives. As inflation rose and interest rates increased, sentiment turned cautious. Capital began flowing into defensive sectors such as healthcare, utilities and consumer staples—industries perceived as more stable in volatile environments.
In Trump’s second term, uncertainty around tariffs, fiscal policy and rising debt has caused more erratic sector performance. Investors have been less focused on a clear rotation pattern and more reactive to short-term developments, contributing to increased market volatility. This lack of clarity in sector leadership reflects a broader hesitation among investors about the direction of economic policy.
Presidents and the Stock Market: How Should I Invest?
While market performance often fluctuates during a presidency, long-term returns are shaped more by economic fundamentals than political leadership. Historically, markets have grown under both Republican and Democratic administrations, and trying to time investments around elections or policy shifts has rarely led to better outcomes.
Stick With a Long-Term Plan
For most investors, staying disciplined is more effective than reacting to short-term political events. A well-diversified portfolio tailored to your goals, risk tolerance and time horizon is more likely to absorb temporary volatility and participate in market recoveries. Avoiding emotional decisions during political transitions can help prevent locking in losses.
Diversify With Purpose
Diversification across asset classes and sectors helps reduce reliance on any single outcome. Rather than adjusting an entire portfolio based on who’s in office, consider how various sectors might respond to shifting policy priorities. For example, healthcare, energy and infrastructure often see movement depending on federal initiatives.
Use Sector Tilts Sparingly
If you want to act on policy expectations, modest sector tilts may offer a balanced way to express those views without overcommitting. For example, a slight overweight in green energy during a Democratic administration or traditional energy during a Republican term could reflect anticipated policy trends.
Keep Contributing and Rebalancing
Regular contributions, such as monthly investments through a 401(k) or brokerage account, allow you to benefit from dollar-cost averaging. Periodic rebalancing helps maintain your asset mix as markets move, avoiding unintended concentration in a single asset class that may be out of step with your long-term strategy.
Avoid Overreacting to Headlines
News cycles often amplify uncertainty, but markets have historically rebounded from political and economic shocks. Sticking with a disciplined investment process helps avoid making decisions based on fear or speculation.
Bottom Line
Market performance under Trump and Biden has reflected two very different environments—one driven by tax cuts and growth, the other by recovery and rate hikes. Trump’s current term has added new market pressures with tariffs and fiscal policy concerns. But over time, long-term trends like innovation, interest rates and global supply chains often matter more than who’s in office. Keeping perspective amid headlines helps maintain a strategy focused on lasting growth rather than short-term swings.
Investment Planning Tips
- A financial advisor can help you mitigate risk for your portfolio. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Asset allocation is a prime concern for investment and portfolio construction. SmartAsset’s asset allocation calculator can help you select an asset mix that fits your personal risk tolerance and investment style.
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