The S&P 500 (^GSPC -1.11%) has enjoyed a nice run since Donald Trump won the presidential race on Nov. 5, 2024.
How long will the “Trump bump” for the stock market last?
Presidential bumps and slumps How does the stock market typically react after a new president is elected?
For more years A recent survey by CNBC found that most investors believe the stock market will flourish in a second Trump term.
Over the long term, though, the S&P 500 has always delivered solid returns.
Since Donald Trump won the presidential election in November, the SandP 500 (~GSPC -1.11 percent) has had a good run. 5, 2024. . After the Federal Reserve suggested that fewer rate cuts might be forthcoming than anticipated, the widely followed index retreated, but it is currently rising and is only about 1% below the record high.
Based on historical data, how long will the stock market’s “Trump bump” last?
Presidents bump and slump.
No consistent theme has emerged regarding how the stock market usually responds to the election of a new president, or how long positive momentum lasts into the new president’s term.
There have been ten new U.S. since 1960. S. . presidents. I didn’t include Lyndon B. Johnson because John F. Kennedy was the president before him. Kennedy’s murder prior to his 1964 election victory, which was effectively a reelection. Of those, only half saw an increase in the S&P 500.
The stock market posted a robust gain of almost 9% by the time of JFK’s inauguration in January 1960, following his election. 20th of 1961. The S&P 500 sank in 1962, despite maintaining its momentum in the first year of his term.
But following the elections of Jimmy Carter in 1976 and Richard Nixon in 1968, there were no hiccups. Following the election of Ronald Reagan in 1980, the S&P increased by a few percentage points. However, in the first year of his first term as president, the market started to sell off.
The George H. W… Reagan left Bush with a robust economy and stock market. In the period between his election and inauguration, the S&P 500 rose by almost 5%. The market fell precipitously in October 1989, ending the honeymoon.
Following Bill Clinton’s initial election in 1992, stocks experienced a slight increase. But that slow start picked up steam and continued for years. It was not until 1997—and then only for a short time—that the S&P fell by 10 percent or more. One of the most robust bull markets in history was led by Clinton.
At the time George W. Bush barely won the presidency in 2000, but the party was over. Following his election, stocks dropped as the .-com bubble burst further. The election of Barack Obama in 2008 coincided with a significant downturn for the S&P 500. In the period between Election Day and his inauguration, stocks fell by almost 20%.
The first “Trump bump” occurred in 2016, when the index increased by nearly 6% in the run-up to his inaugural inauguration. Up until the second half of 2018, when stocks experienced a significant decline, this bull market persisted. The losses were eliminated by the middle of 2019, however, as the S&P kept rising until the pandemic caused a sharp decline.
As the S&P 500 surged 14 percent between his election and inauguration, Joe Biden experienced the largest presidential boost of all. The market continued to rise during Biden’s first year in office, but in 2022 it fell.
historical lessons.
What does the history of presidential bumps teach us, then? Not much. Throughout the past 70 years, the likelihood of the S&P 500 increasing following the election of a new president is equal to the likelihood that the index will fall.
When the market increased between Election Day and the day of the inauguration, the momentum was short-lived in three out of five instances. The only instance of a bull market continuing into the second presidential term was during the administration of Bill Clinton.
The most significant lesson from history is probably that it is not a good indicator of how the stock market will do under a new president. There has never been a distinct historical pattern for stocks because macroeconomic factors have fluctuated so much over time.
For many more years.
According to a recent CNBC survey, the majority of investors think that a second Trump term will see the stock market thrive. However, since many people recall the S&P 500’s gains over a large portion of Trump’s first four years in office, that sentiment may just be nostalgic thinking at play.
The fact that interest rates are higher now than they were during Trump’s first term as president should not be overlooked. Additionally, compared to eight years ago, he seems more determined to impose high tariffs on all goods. Many economists predict that the United States will suffer from these tariffs. S. . economy, which might lead to a drop in stock prices.
Regardless of the person holding the presidency, I believe that investors should concentrate on a longer time horizon than a single term. The stock market’s performance in the near future is uncertain. However, the S&P 500 has consistently produced strong returns over the long run. Your chances of success are higher the longer your investment period is.
