The S&P 500 Has Risen 30.6% in the First 20 Months of Trump's Second Term, Just Ahead of the 28.5% Gain Over the Same Stretch of His First Term. Here's Why That Comparison Matters for Investors Heading Into the Midterms.

Barring a fourth-quarter collapse of epic proportions, the S&P 500 (SNPINDEX: ^GSPC) will notch another positive annual performance in 2026, meaning that of the six years President Donald Trump has been commander in chief, 2018 still ranks as the worst year for stocks.

During that year, the S&P 500 lost 5.2% due largely to a trade war with China, one that some experts believe Trump sought out. Fast-forward to September 2026, and over 20 months of Trump's second term, stocks are performing remarkably similarly to what was seen during Trump's first term.

After 20 months of President Trump's second term, the S&P 500 is performing better than it did in his first term. Image source: Getty Images.

Actually, the S&P 500 (as of Sept. 30) is actually pacing ahead of where it was in Trump's first term, increasing 30.6% since Trump took office the second time, versus 28.5% in the first 20 months of his first term. Let's get into why that comparison matters.

History matters

Good investors are often students of market history because past scenarios have a way of repeating, as do investors' responses to those situations. That's pertinent to discussing the performance of the S&P 500 during the first 20 months of the two Trump terms because midterm election years are historically the worst for stocks. The S&P 500's average gain in a midterm election year is just 4.9%, less than half the market's historical average gain.

But the market is bucking that trend this year. Historically, the best year for the market is the third year of the presidential cycle, which suggests 2027 could be another solid year for the market.

There's another factor at play. In 2018, Democrats gained control of Congress, and due to macroeconomic headwinds such as high inflation and broader affordability concerns, political pundits are implying it's almost a foregone conclusion that Democrats will gain control of the House in this fall's election, and also have a credible shot at earning a Senate majority.

Regardless of the preferred party, investors may breathe a sigh of relief because history confirms that a divided government is usually beneficial to stocks. It acts as a "handcuff" on either party, preventing it from enacting sweeping legislation that could roil financial markets. For those keeping score at home, the Vanguard S&P 500 surged 28.9% in 2019 under Trump and a Democratic congressional majority.

How to invest

Of course, investors can't directly buy the S&P 500. But they can buy an exchange-traded fund that tracks the index, and the Vanguard S&P 500 ETF (NYSEMKT: VOO) is an ideal option thanks to its direct correlation with the index and a low expense ratio of 0.03%, or $3 annually for $10,000 invested.

Admittedly, comparing the S&P 500's performances in the first 20 months of Trump's first and second terms has some bumps. Even when accounting for the trade war with China, the 2018 environment was far more sanguine than it is today.

That's certainly true from a geopolitical perspective. The war in Iran pushed oil prices (and inflation) to uncomfortably high levels. Not to be lost in that shuffle is the fact that the war in Ukraine has now lasted longer than U.S. involvement in World War II.

The point is, stocks have been resilient in the face of a variety of challenges. Whether any politician deserves credit for that is a conversation for another day, but ahead of Election Day and the start of 2027, that sturdiness is an encouraging sign.

Todd Shriber has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.