Will There Be a Stock Market Crash in Year 6 of Donald Trump's Presidency? One Historically Flawless Metric Paints a Worrisome Picture.

From a purely statistical standpoint, Wall Street has enjoyed having Donald Trump in the White House. Although Wall Street's broad-market indexes rise under most presidents, the average annual returns of the time-tested Dow Jones Industrial Average (DJINDICES:^DJI), benchmark S&P 500 (SNPINDEX:^GSPC), and tech-fueled Nasdaq Composite (NASDAQINDEX:^IXIC) are considerably higher under President Trump than under almost all presidents since the late 1890s.

While not all of Wall Street's upside catalysts pertain to Trump (e.g., the artificial intelligence (AI) infrastructure build-out), certain policies have directly provided a boost, such as the signing of the Tax Cuts and Jobs Act into law in December 2017. Permanently lowering the peak marginal corporate income tax rate from 35% to 21% enabled businesses to retain more of their income, leading to record S&P 500 share buybacks in 2025.

The Trump bull market may face its toughest test yet. Image source: Official White House Photo by Daniel Torok.

But expecting outsize returns to continue throughout Trump's sixth year as president may be a mistake. Although historical events can't guarantee what's to come, one metric with a flawless track record of foreshadowing the future paints a worrisome picture for stocks, leaving the door wide open for a stock market crash.

Investors' willingness to take risks has gone parabolic (and that's terrible news for stocks)

At any given time, several headwinds are threatening to pull the rug out from beneath investors. Historically high stock valuations and the prospect of an AI bubble forming and bursting are two perfect examples.

But there may not be a more worrisome metric for the bull market under President Trump than outstanding margin debt.

Margin represents the money an investor borrows from their broker, with interest, to wager against (short-sell) or purchase securities. When margin is used to purchase a stock or exchange-traded fund, it's a form of leverage -- and using leverage for investment purposes can be dicey.

If the security you've purchased using margin moves in the desired direction, you can amplify your gains. However, if the security heads in the opposite direction, margin can magnify your losses. Thus, outstanding margin debt serves as a crude measure of investors' willingness to take risks.

Total Margin Debt hits $1.5 Trillion, a new all-time high 🤯 👀 pic.twitter.com/1IXqZGgrqs

— Barchart (@Barchart) July 20, 2026

In June 2026, outstanding margin debt, as reported by FINRA, reached an all-time high of $1.502 trillion. Over time, margin debt is expected to increase in lockstep with the overall value of the stock market. But when investors' willingness to take risks goes parabolic over a short time frame, it's proven disastrous for equities.

Between April 2025 and June 2026, outstanding margin debt rocketed higher by 77%. Although it retraced a bit in July ($1.417 trillion), FINRA's latest report shows that risk-taking picked up again in August ($1.454 trillion).

Over the last three decades, outstanding margin debt has soared by at least 65% over a short time frame on four occasions:

• March 1999 to March 2000: In the 12-month lead-up to the bursting of the dot-com bubble, margin debt surged 80% to nearly $300 billion. After the internet-driven bubble burst, the S&P 500 and Nasdaq Composite lost 49% and 78% of their respective values.
• June 2006 to July 2007: In the 13 months leading up to the financial crisis, outstanding margin debt catapulted 66% to roughly $416 billion. Once the floor fell out, the S&P 500 shed 57% of its value.
• March 2020 to October 2021: Several rounds of fiscal stimulus sent margin debt screaming higher by 95% over 19 months. Just three months after this temporary peak, the 2022 bear market wiped away a fifth, quarter, and third of the Dow's, S&P 500's, and Nasdaq's respective values.
• April 2025 to June 2026: The evolution of AI sent margin debt rocketing higher by 77% over 14 months.

Based on historical precedent, parabolic moves in margin debt foreshadow an upcoming disaster for Wall Street. While this doesn't guarantee that it'll take the form of a stock market crash, it does suggest a heightened likelihood that a crash takes place in year six of Trump's presidency.

Image source: Getty Images.

Silver linings can be found in even the direst of situations

Even if the stock market doesn't crash under President Trump, the foundation has been laid for a steep decline following a parabolic increase in outstanding margin debt. However, the disparity in length between bull and bear markets on Wall Street is something that long-term-minded investors are wise enough to not overlook.

History tells us that stock market corrections, bear markets, and even the occasional crash are inevitable. Since these events are often driven by investors' emotions, no amount of fiscal or monetary policy maneuvering can keep them from occurring.

But what really stands out is how short-lived stock market downturns tend to be.

Four months ago, the analysts at Bespoke Investment Group published a data set on X (formerly Twitter) that compared the calendar-day length of every S&P 500 bull and bear market since the start of the Great Depression in September 1929. Bespoke's researchers found that the typical bear market resolves in 286 calendar days, which is less than 10 months.

The current bull market that began on 10/12/22 is now the 9th longest in S&P 500 history, surpassing the 1,324-day bull that ended on 2/9/1966: pic.twitter.com/4mGsS2t2ft

— Bespoke (@bespokeinvest) May 30, 2026

On the other hand, the average S&P 500 bull market has lasted 1,023 calendar days, or 3.6 times longer than the typical bear market. What's more, 14 of 27 bull markets over the last 97 years have persisted longer than the lengthiest bear market (630 calendar days).

While history shows that outsize risk-taking is terrible news for equities, the bigger picture remains incredibly promising for the stock market. If a short-lived downturn does take shape in year six of Trump's presidency, long-term-minded investors should view it as an opportunity to pounce.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.