Breaking Down the Stock Market Under Trump vs. Biden

Stock market performance under the Trump and Biden administrations unfolded against very different economic backdrops. During Trump’s first term, markets benefited from steady expansion and a sustained bull run before the pandemic, helping the S&P 500 deliver relatively strong annualized returns. Biden assumed office during a more volatile period defined by post-pandemic recovery, elevated inflation, rising interest rates and ongoing global uncertainty. While major indexes reached record levels during both presidencies, average returns were stronger during Trump’s first term, largely reflecting the more stable economic conditions that prevailed before COVID-19 disrupted global markets.

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Stock Market: Trump vs. Biden

Stock market performance during any presidency reflects a wide range of influences beyond government policy. Interest rates, global economic conditions, geopolitical developments and shifts in investor sentiment all contribute to how markets perform over time.

Even with those broader forces at work, comparing major indexes such as the S&P 500, Dow Jones Industrial Average (DJIA) and Nasdaq during the Trump and Biden administrations reveals meaningful differences in market direction, investor positioning and sector leadership across each period.

S&P 500 Performance

During Trump’s first term in office, the S&P 500 increased from approximately 2,271 on Jan. 20, 2017, to about 3,798 by Jan. 20, 2021, marking a gain of around 67% over four years. ¹ This period was characterized by corporate tax cuts and deregulation, which supported equity markets. The index experienced volatility during the onset of the COVID-19 pandemic, but recovered swiftly.​

The market benefited from economic reopening and stimulus measures, but faced challenges from inflation and interest rate hikes. Despite these headwinds, the index reached new highs during this period.​

Dow Jones Industrial Average (DJIA) Performance

This growth was supported by policies favoring industrial and financial sectors. The index experienced a sharp decline during the early stages of the pandemic but rebounded by the end of his term.​

During Biden’s tenure, the DJIA increased from approximately 31,188 to about 43,488 by Jan. 17, 2025, marking a gain of roughly 39.5%. ² The index benefited from continued economic recovery and corporate earnings growth, though it faced periods of volatility due to monetary policy shifts and global uncertainties.​

Nasdaq Composite Performance

Under Trump, the Nasdaq Composite surged from about 5,555 to approximately 13,197, more than doubling over four years. This growth was driven by strong performance in the technology sector, supported by low interest rates and robust earnings.​

During Biden’s term, the Nasdaq Composite rose from around 13,197 to approximately 19,630 by Jan. 17, 2025, achieving a gain of about 48.7%. ³ The index reached new highs, propelled by continued strength in technology and growth stocks, despite facing challenges from rising interest rates and inflation concerns.​

Overall, while all three major indexes experienced gains under both administrations, the magnitude and drivers of these gains varied, reflecting differing economic conditions and policy environments.​

For a quick recap, the table below summarizes stock market performance under Trump’s first term vs. Biden’s only term:

Stock Market During Trump’s Second Term

President Donald Trump’s second term has introduced significant volatility to financial markets, largely attributed to expansive tariff policies and unpredictable economic strategies. The announcement of broad tariffs on imports led to immediate and substantial declines in major stock indices, with the S&P 500 experiencing a notable drop shortly after the policy’s implementation.

The administration’s approach to trade has been characterized by abrupt policy shifts and a lack of clear economic direction, contributing to investor uncertainty. Analysts have observed that the absence of a coherent economic roadmap has eroded confidence among institutional investors, leading to heightened market volatility. ​

Despite tariff-induced volatility earlier in the year, the S&P 500 was up approximately 16% from Jan. 1, 2025 through Dec. 15, 2025. Meanwhile, the DJIA was up more than 14% and the Nasdaq Composite gained over 19.5% during the same period.

However, economists have warned that the combination of aggressive trade measures and inconsistent policy communication may have negative long-term implications for market stability and economic growth. The potential for retaliatory actions from trade partners and the strain on global supply chains add to the complex challenges facing investors.​

In this environment, market participants are advised to exercise caution and closely monitor policy developments. The ongoing interplay between trade strategies and economic indicators continues to influence market dynamics.​

Investor Sentiment and Sector Rotation Trends

Sector rotation describes the movement of investor capital between different parts of the economy in response to changing expectations about growth, inflation, interest rates and policy. During periods of economic expansion, investors often favor cyclical sectors such as technology, financials and industrials, which tend to benefit from rising business activity. In contrast, during periods of uncertainty or slowing growth, capital frequently shifts toward defensive sectors like healthcare, utilities and consumer staples, which are generally viewed as more stable. These allocation shifts offer insight into how markets interpret current conditions and anticipate future economic trends.

During Trump’s first term, investor sentiment reflected expectations of business-friendly policies, including corporate tax rate reductions and deregulation. These measures supported optimism in cyclical sectors such as industrials, financials and energy. At the same time, relatively low interest rates and continued innovation helped sustain strong performance in technology stocks, which played a central role in driving overall market sentiment.

Under Biden, investor sentiment initially improved amid expectations surrounding infrastructure spending and clean energy investment. However, as inflation accelerated and interest rates rose, market confidence became more measured. Investors increasingly reallocated capital toward defensive sectors such as healthcare, utilities and consumer staples, which are often considered better positioned to withstand economic volatility and tighter monetary conditions.

In Trump’s second term, uncertainty related to tariffs, fiscal policy and rising federal debt has contributed to more uneven sector performance. Rather than following a sustained rotation into specific industries, investors have responded more reactively to policy developments and economic signals. This pattern of shorter-term repositioning, combined with less consistent sector leadership, reflects broader caution about the direction of economic policy and its potential implications for growth.

Presidents and the Stock Market: How Should I Invest?

Although market performance can vary during a presidential term, long-term returns tend to depend more on underlying economic fundamentals than on political leadership. Historically, markets have advanced under both Republican and Democratic administrations, and attempts to time investments around elections or policy changes have rarely produced superior results.

With that in mind, here are six general tips to consider when developing an investment strategy.

1. Stick With a Long-Term Plan

For most investors, staying disciplined is more effective than reacting to short-term political events. A well-diversified portfolio tailored to your goals, risk tolerance and time horizon is more likely to absorb temporary volatility and participate in market recoveries. Avoiding emotional decisions during political transitions can help prevent locking in losses.

2. Diversify With Purpose

Diversification across asset classes and sectors helps reduce reliance on any single outcome. Rather than adjusting an entire portfolio based on who’s in office, consider how various sectors might respond to shifting policy priorities. For example, healthcare, energy and infrastructure often see movement depending on federal initiatives.

3. Use Sector Tilts Sparingly

If you want to act on policy expectations, modest sector tilts may offer a balanced way to express those views without overcommitting. For example, a slight overweight in green energy during a Democratic administration or traditional energy during a Republican term could reflect anticipated policy trends.

4. Keep Contributing and Rebalancing

Regular contributions, such as monthly investments through a 401(k) or brokerage account, allow you to benefit from dollar-cost averaging. Periodic rebalancing helps maintain your asset mix as markets move, avoiding unintended concentration in a single asset class that may be out of step with your long-term strategy.

5. Avoid Overreacting to Headlines

News cycles often amplify uncertainty, but markets have historically rebounded from political and economic shocks. Sticking with a disciplined investment process helps avoid making decisions based on fear or speculation.

6. Review Taxes and Policy Impacts

While short-term politics should not drive your entire strategy, tax law changes and new regulations can affect investment returns. For example, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law on July 4, 2025, which made significant tax changes. Therefore, reviewing your portfolio with a tax-aware approach, such as managing capital gains, using tax-advantaged accounts or adjusting charitable giving strategies, can help you adapt to policy shifts without overhauling your long-term plan.

Bottom Line

Market performance under Trump and Biden has reflected two very different environments: one driven by tax cuts and growth, the other by recovery and rate hikes. Trump’s current term has added new market pressures with tariffs and fiscal policy concerns. But over time, long-term trends like innovation, interest rates and global supply chains often matter more than who’s in office. Keeping perspective amid headlines helps maintain a strategy focused on lasting growth rather than short-term swings.

Investment Planning Tips

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• Asset allocation is a prime concern for investment and portfolio construction. SmartAsset’s asset allocation calculator can help you select an asset mix that fits your personal risk tolerance and investment style. 

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