For three-quarters of a century, no president has managed to achieve what was recently observed, making this development truly noteworthy.
Investing in stocks has long been considered the golden ticket for maximizing average annual returns, surpassing other asset classes for over a century. However, it’s important to remember that the stock market’s journey from one point to another is rarely a straightforward path.
In recent weeks, we’ve seen some dramatic shifts. The Dow Jones Industrial Average, along with the S&P 500 and the Nasdaq Composite, have taken a noticeable downturn. Since February 19, when the S&P 500 reached its peak closing high, the Dow, S&P 500, and Nasdaq Composite have plummeted by 9.2%, 12.2%, and 17.5%, respectively. These declines place the S&P 500 and Nasdaq firmly in correction territory, with the Dow not trailing far behind.
This drop might be surprising given the robust performance the stock market saw at the end of President Donald Trump’s first term. When he stepped down on January 20, 2021, the Dow, S&P 500, and Nasdaq had grown by 57%, 70%, and an impressive 142%, respectively. Trump’s focus on industry deregulation and lowering corporate taxes suggested a favorable environment for investors.
Yet, Trump’s initial two months back in office have carved out a unique place in history, and not one he’d likely celebrate.
Donald Trump has etched his name into the annals of stock market history, and it isn’t for a remarkable rally. While market corrections are a regular part of investing, often viewed as healthy and necessary, Trump holds the distinct record for presiding over the fastest 10% downward corrections from a 52-week high in the S&P 500 since 1950.
According to data from Bloomberg, compiled by Fundstrat, the quickest 10% drop-offs in the S&P 500 in the past three-quarters of a century look like this:
– February 19, 2020, to February 27, 2020 (8 calendar days) during Trump’s presidency.
– January 26, 2018, to February 8, 2018 (13 days) under Trump.
– June 12, 1950, to June 29, 1950 (17 days) during Truman’s term.
– September 23, 1955, to October 11, 1955 (18 days) with Eisenhower.
– February 19, 2025, to March 11, 2025 (20 days) yet again under Trump.
This last 10% dip over 20 days shares a timeline with downturns faced by Presidents Clinton and Carter. Still, Trump uniquely managed three such swift declines within 20 days or less in the benchmark index.
While the COVID-19 pandemic’s impact in February 2020 was an unforeseeable crisis, the declines in 2018 and 2025 can arguably be linked to Trump’s policies. The 2018 fall was driven by inflation concerns and interest rate hikes, whereas recent drops are closely tied to his controversial “Liberation Day” tariff announcements.
On April 2, Trump introduced a slew of global tariffs along with retaliatory measures against countries with historical trade imbalances with the U.S. These measures notably targeted key international players in the tech and retail sectors. As of April 3, the Atlanta Fed’s GDPNow model was forecasting a 2.8% GDP contraction for the first quarter.
Given the market’s high valuation entering 2025 and Trump inheriting a particularly pricey market, these significant drops in the S&P 500 and Nasdaq aren’t entirely unexpected.
While Trump’s tariff policies and the stock market’s reaction early in his second term might not sit well with investors, there’s a silver lining for those focused on the long-term game. These market corrections offer potential opportunities for savvy investors.
Stock market corrections happen as part of the natural cycle, driven by sentiment swings, rather than fiscal policy shifts. The key is maintaining a long-term perspective amidst the noise.
Back in June 2023, Bespoke Investment Group shared data on the differences between bull and bear markets since the Great Depression. While bear markets averaged about 286 days, bull markets had a much longer run, lasting approximately 1,011 days. This imbalance has consistently turned stock market corrections into opportunities for those with a long-term vision.
Further reinforcement of this idea is found in Crestmont Research’s examination of the S&P 500’s performance over the past century. Analyzing 106 rolling 20-year periods going back to 1900, they found that all yielded positive returns. This historical view suggests that despite political policies, wars, and market collapses, investing in the S&P 500 over two decades has always turned a profit when dividends are included.
The narrative echoes the age-old strategy of seeing downturns as opportunities for long-term wealth growth.
