Trump’s undeniable stock market victory that no one saw coming

By John Towfighi, CNN

New York (CNN) — One year after President Donald Trump’s reelection, the US stock market continues to notch record highs.

The S&P 500 has gained 19.6% over the past 12 months, boosted by strong corporate earnings and investors’ enthusiasm about artificial intelligence. Stocks have been remarkably adaptable, defying concerns about a resurgence in global trade tensions and bouts of intense volatility.

To Trump, the market’s gains are a vindication of his policies. The president on October 27 touted stocks’ record highs while speaking to a crowd with Japanese Prime Minister Sanae Takaichi.

“Their stock market today and our stock market today hit an all-time high,” Trump said. “That means we’re doing something right.”

But some analysts say the stock market’s gains have a more prosaic reason: Corporate earnings continue to impress Wall Street, and investors are betting big on AI.

Ascent to all-time highs

In fact, the market’s resilience has been surprising, said Jed Ellerbroek, portfolio manager at Argent Capital Management, considering Trump’s “pretty aggressive changes and approaches” to tariffs and the Federal Reserve, which he has pressured to lower interest rates.

“Trump’s introduced a lot of uncertainty into markets over the last year,” Ellerbroek said. “The market hates uncertainty.”

Investors have turned their attention to corporate America’s profits and tried to look past concerns about tariffs, he said.

Technology has made that easier to do, he said, because “this AI investment cycle is humongous and unprecedented and overwhelming any and all of those things.”

The S&P 500, which is weighted by market value, has become increasingly concentrated in big tech companies. Nvidia (NVDA), which just hit $5 trillion in market value, now accounts for 8% of the S&P 500’s market value.

An equal-weighted version of the S&P 500, which gives all the companies in the index an equal part, is up just 6% over the past 12 months, compared to the benchmark index’s 19.6% gain.

Weathering tariff turmoil

The S&P 500 fell as much as 19% in April as Trump rolled out his plan for tariffs. But as markets tumbled, the Trump administration walked back its most severe proposals.

Since then, the S&P 500 has coasted higher. The index is up six months in a row.

“Stocks may be higher in part because the administration’s final tariff actions were ultimately less severe than initially feared,” said Mark Malek, CIO at brokerage firm Siebert Financial. “Were it not for the tariff-driven swoon earlier this year, markets would likely be even higher today.”

The Treasury market has also advanced. Despite concerns about US deficits, Trump’s “One Big Beautiful Bill Act” and attacks on the Fed’s independence, investors have still flocked to US government bonds.

The 10-year US Treasury yield, which influences a host of interest rates across the economy, has declined from 4.4% in November 2024 to 4.1% this month.

Wall Street’s fear gauge, the CBOE Volatility Index, has signaled relative calm in markets for the majority of the past six months. An index tracking volatility in the bond market is hovering near its lowest level this year.

“We want the most America-first policies that are possible, without incurring market wrath,” Treasury Secretary Scott Bessent told the Financial Times in an interview in October.

“What gets the people in trouble is they come in, they have these ideas, but they don’t respect the market … you’ve got to respect the market,” Bessent said.

Taking the baton

When Trump was reelected, investors cheered the potential for deregulation and tax cuts, while the Fed had recently cut interest rates, providing a boost for stocks.

Ross Mayfield, an investment strategist at Baird, said he has not been surprised by the stock market’s ascent.

“The administration has largely delivered on a lot of those things that investors were so bullish about,” Mayfield said.

“Ultimately you zoom back and you say, ‘All right, it’s an AI bull market,’” Mayfield said. “The administration took the baton from the last administration only two years into a bull market, still with a lot of leg room left and companies growing their earnings.”

From Trump’s election through the end of October, the S&P 500’s rise was the eighth best for a president’s first year since the end of World War II, according to CFRA Research data. The S&P 500 climbed roughly 38% during the same period during President Joe Biden’s term, marking the best performance on record.

And the US stock market’s gains pale in comparison to global markets. In South Korea, the benchmark Kospi index has soared 66% across the past 12 months. Hong Kong’s Hang Seng index has gained 28%. Benchmark stock indexes in Poland and Greece have gained 52% and 60%, respectively.

“What’s happening in Washington matters, but it’s not the only thing that matters,” said Keith Lerner, chief market strategist at Truist. “The North Star of this bull market is corporate profits.”

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