Will the Stock Market Soar or Crash Under President Donald Trump in 2026? Here's What History Shows.

Even if you could have predicted everything that has impacted the stock market so far in 2025 -- from President Donald Trump's tariffs to his large spending bill to the trajectory of inflation and the economy -- my guess is you still would have struggled to correctly predict how the market would react to each event. That's why almost all experts will tell you that timing the market is next to impossible.

While Trump is arguably one of the most unpredictable presidents of all time, investors, analysts, and market strategists often try to use the past to look for clues regarding what could happen in the future. Will the stock market soar or crash under President Trump in 2026? History won't tell us for sure, but here's what it shows might happen.

Donald Trump. Official White House Photo by Joyce N. Boghosian.

Presidential terms do contain patterns

Investors should always keep in mind that just because past data indicates a specific trend or outcome, that could all be coincidental. Stock market performance by the year of a presidential term likely falls into this category. That said, market strategists have, of course, looked at the average return of the broader benchmark S&P 500 index by the year in a presidential term, and here's what the data says, according to research from Charles Schwab. These numbers are averages, so this does not mean that the stock market has gone up 6.7% in every first year of every presidential term.

• First Year: 6.7%
• Second Year: 3.3%
• Third Year: 13.5%
• Fourth Year: 7.5%

If this data holds true, then 2026 -- the second year of Trump's second term -- could be a tough year for the stock market. Decades ago, researcher Yale Hirsch published his theory on this phenomenon in Stock Trader's Almanac. Hirsch believed that a president is more likely to encounter wars, economic downturns, and bear markets during the first half of their term, some of which did happen in Trump's first year. The second year leading up to midterm elections also tends to lead to volatility.

Trump also decided to pursue his controversial tariffs in 2025, which the stock market has swung wildly on. While there is certainly more clarity than there was six months ago, the market still seems touchy about trade news, and many details regarding trade deals are still unknown. Hirsch's theory is that the market's performance in the second half of a presidential term is stronger because there is more of a focus on re-election, making the president more likely to promote policies stimulating the economy. However, Trump is not eligible to run again for president.

While some economists view tariffs as a headwind for the economy, Congress also passed a large spending package that made tax cuts from Trump's first term permanent and implemented other temporary tax cuts that could serve as tailwinds for the economy.

Nobody knows for sure

In my view, Trump is one of the most, if not the most, unpredictable presidents in history.

Tariffs are likely one of the more difficult policies for Trump to impose, so with most of the big tariff announcements likely in the rearview mirror, the stock market may have an easier path forward. However, there are so many other factors at play, like what will happen with inflation and whether the economy will eventually slip into a downturn, as there has been evidence of weakening consumer spending and softer labor markets.

There are also elevated stock valuations and the artificial intelligence boom that some fear may be a bubble. It's been a bull market for much of the last three years, so one would think the market is due for a pullback. That said, even during the dot-com bubble in the late 1990s, the bull market raged far longer than most could have imagined.

So, if you look at history, the stock market could be in for a difficult year in 2026, and there are plenty of factors that could trigger a sell-off. But remember, history rarely repeats itself, yet often rhymes. Investors should not waste their time or money trying to time the market. Keep a long-term investing horizon because the data clearly shows that the longer an investor can hold stocks, the less likely they are to lose money.

Charles Schwab is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab and recommends the following options: short December 2025 $95 calls on Charles Schwab. The Motley Fool has a disclosure policy.