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How did the stock market perform during the first year of the second Trump administration? In short, the main U.S. equity indexes closed 2025 at or near all-time highs after posting double-digit annual gains like they did in 2024 and 2023. And the direction of the major trend remains up.
Indeed, equity indexes all over the world rallied in the face of what many market participants describe as historic uncertainty throughout the 12 months. Most encouraging is the fact that upside was driven by earnings growth as opposed to valuation expansion.
As Carson Group notes, “The S&P 500’s 17.9% return in 2025 came mostly from profit growth, powered by sales growth and margin expansion.” The math shows 14.3% of the S&P 500’s upside was due to earnings growth (including 5.5% sales growth and 8.8% margin expansion), 2.1% was a result of multiple expansion, and dividends accounted for 1.5%.
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“2025 offered a reminder that investors can still make meaningful progress in an environment that rarely felt calm or straightforward,” Sequoia Financial Group writes in its year-end review. “Progress,” Sequoia observes, “was earned through discipline: staying invested when headlines were unsettling, leaning on diversification when it was uncomfortable, and letting fundamentals – not sentiment – set the tone.”
The year will likely be memorialized with multiple entries on a widely circulated chart that plots major economic, political and social disruptions on a long-term “up and to the right” price line. And perhaps the “long 2025” trade began on November 5, 2024, when Donald Trump won the U.S. presidential election.
In January 2025, Trump was the first president to be inaugurated for a second but non-consecutive term since the late 19th century. And between Election Day and Inauguration Day, the S&P 500 gained 4%.
Last April will likely be defined by “Liberation Day,” at least from a stock market perspective, for years to come. And the fourth quarter was marked by the longest government shutdown in American history.
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Yet, despite unpredictable tariffs and lingering inflation, volatile interest rates and murky monetary policy, political upheaval and consumer pessimism, stocks extended the long-term trend.
As of the closing bell on December 31, 2025, the broad-based S&P 500 read 6,845.50, up from 5,881.63 on December 31, 2024, a price-only rise of 16.4% that increases to 17.9% when you add in dividends. The blue-chip Dow Jones Industrial Average generated a total return of 14.9%, and the tech-heavy Nasdaq Composite added 21.4%.
“The foundation for better markets was quietly being rebuilt, even as sentiment wavered,” Sequoia Financial Group concludes. “As 2026 begins, the conditions are in place for returns to broaden beyond a narrow group of leaders.”
At the end of the first year of the second Trump administration, it all adds up to a healthier backdrop for global equities.
When and why stocks perform well
It wasn’t a straight line higher, and it never is. But three straight years of double-digit gains for all three main indexes is impressive, even if the first year of the second Trump administration lagged 2024 and 2023, when the S&P 500 was up 25.0% and 26.3%, the Dow 15.0% and 16.2% and the Nasdaq 29.6% and 44.6%, respectively.
And, on a Donald-vs-Donald basis, the first year of the second Trump administration was worse than the first year of the first Trump administration. The Nasdaq surged 29.6% (price plus dividends) in 2017, while Papa Dow added 28.1% and the S&P 500 increased 21.8%.
It’s important to understand, though, that among the innumerable factors in the countless decisions that drive day-to-day price action, even the actions of this heavy-handed chief executive amount to not much more than short-term noise.
That’s not to say stocks won’t respond. The Cboe Volatility Index (VIX), which measures expectations for 30-day forward-looking price movement for the S&P 500 and is known as the market’s “fear index,” got up to 60.13 on April 7. Then it quickly settled back into normal range, between 12 and 20, where it’s resting right now.
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The bond market will also respond, and in a way that enforces the only kind of discipline this president will heed. Note that the yield on the 10-year U.S. Treasury note was 4.163% as of December 31, 2025, vs 4.573% as of December 31, 2024.
The U.S. Dollar Index (DXY) closed at 108.58 on December 31, 2024, and rose to a recent high of 110.18 on January 13, 2025, a week before Trump’s second inauguration. It closed the year at 98.28. As it is with market rates, what investors, traders and speculators track here is stability, or the change in the rate of change.
Market-based rates and the DXY have been volatile, but the process of discovering the price of things like Trump’s tariffs and his attacks on central bank independence revealed, again, that the foundation of the global financial system is solid – solid enough to support a resilient stock market.
And, since April, both rates and the dollar have been relatively quiet.
What 2025 means for stocks in 2026
It is a market of stocks – in fact, many, many more than the Magnificent 7 stocks – but Nvidia (NVDA) and the AI revolution remain the fundamental force underneath it all right now.
As Sequoia says, spending on AI, the cloud and other infrastructure surged in the second half of 2025 – “but this time, the payoff was measurable.” AI- and tech-related names drove earnings growth and equity returns last year, accounting for about 67% of the former and 60% of the latter.
At the same time, as Sequoia writes, “What once looked like concentrated leadership increasingly resembled genuine reinvestment and a powerful structural shift in corporate profitability.”
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Whether we’re in an AI boom or an AI bubble is and will remain a fascinating debate. In the meantime, participation is expanding and leadership is changing.
Global stocks, as measured by the iShares MSCI ACWI ex US ETF (ACWX), generated a total return of 33.6% in 2025. Expansion of the bull market beyond U.S. borders is a good thing.
So is expansion of the bull market within U.S. borders. The Russell 2000 Index (RUT), for example, was up 12.8% in 2025, but in September the index of small-cap stocks established its first new all-time high since November 2021.
The Nasdaq’s number shows tech stocks led again in 2025, but – and this is another broadly positive sign for 2026 – leadership is rotating. Capital is flowing to industrial stocks and utility stocks – the so-called picks and shovels for the AI revolution. Materials stocks are positioned for similar upside based on similar demand-side catalysts.
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Meanwhile, health care stocks surged during the fourth quarter and topped the sector rankings with an 11.7% total return. You’re unlikely to see a bull market without financial stocks participating, and the trend is solid here as well, with the group up 15% for 2025, 2% in the fourth quarter and 3% in December.
As JPMorgan Asset Management Global Market Strategist Meera Pandit writes, returns in 2023 and 2024 were driven mostly by multiple expansion, and they were also highly concentrated. The Mag 7 drove 63% of returns in 2023 but just 43% in 2025.
“What’s more,” Pandit adds, “profits have become less concentrated,” with the Mag 7 responsible for two-thirds of profit growth in 2024 vs an estimated 43% for 2025. “Profit growth has broadened out,” the strategist concludes, “with financials, industrials, utilities and materials all enjoying double-digit year-over-year profit growth in 3Q25.”
About DJT
For the record, Trump Media & Technology Group (DJT) generated a total return of -61.2% for the 12 months ending December 31, 2025. DJT hit its high for the year 10 days before the president moved back into the White House.
DJT stock bounced late in the year when Trump Media merged with TAE Technologies to create a publicly traded nuclear fusion company focused on building utility-scale power plants to meet rising AI energy demand.
Nevertheless, the nuclear revolution, itself a product of the AI revolution, remains a viable theme in 2026. Other themes will emerge this year, too, sustaining the long-term trend like sector rotation and changing leadership do.
Let’s agree with Carson Group that to say “expect volatility in the stock market” is a cliche. As their data shows, in an average year, you’ll see a drawdown of about 14%. Volatility is a “toll” you pay, whether Trump-related or not.
At the end of the day, and as 2025 shows, over the long term, you’ll be rewarded if you stay invested.
