Hello everyone,
For this month, I thought I'd change my tune a little. Lately, I've been dialoging with many of you on whether the President Trump Administration has been good for financial markets or not. To be clear, I'm not talking about morals, rising deficits, or passing judgement on his character. I am simply referring to his impact on financial markets. Before I dive into it, a quick update on financial market performance. The S&P 500 so far for August has delivered a gain of 2.46% (https://ycharts.com/indices/%5ESPX/level), and the TSX up an impressive 3.96% (https://ycharts.com/indices/%5ETSX/level). Notably, energy has been the largest contributor to the TSX on the back of rising oil prices, and in fact, on August 10th energy was up 3.10%, mostly related to Strait of Hormuz uncertainties, go figure!
So, back to my tuning fork. As much as I'm reluctant to acknowledge, by almost any headline measure, one could argue that U.S. equity markets have performed strongly since President Trump's second inauguration on January 20, 2025. BUT…..the picture beneath the surface is more contested, with real gains offset by unusual volatility, inflation pressure, and strain in the bond market.
To begin, let's examine the bull case. Since President Trump's second inauguration, U.S. stocks have posted solid gains. As of mid-August 2026, the Dow, S&P 500, and Nasdaq Composite have risen roughly 21%, 26%, and 32% respectively since Inauguration Day (https://ycharts.com/indices/%5EDJI/level, https://ycharts.com/indices/%5ESPXlevel, https://ycharts.com/indices/%5EIXIClevel). The S&P 500 alone generated a 17.9% total return in the calendar year of 2025 and notched 38 new all-time closing highs that year (https://www.kiplinger.com/investing/stocks/how-the-stock-market-performed-in-the-first-year-of-trumps-second-term). Year-to-date through early August 2026, the index was up another 14.1% (https://www.usbank.com/investing/financial-perspectives/market-news/stock-market-under-trump.html).
Analysts largely credit this run to fundamentals rather than pure sentiment. Carson Group research cited by Kiplinger noted that the 2025 rally came mostly from profit growth, powered by sales growth and margin expansion rather than rising valuations. Other tailwinds cited across sources include continued enthusiasm around artificial intelligence infrastructure spending, record S&P 500 share buybacks, Federal Reserve rate cuts, and the tax provisions in the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025 (https://smartasset.com/investing/stock-market-trump-vs-biden).
By historical standards, this still falls short of President Trump's first term, when the S&P 500 delivered a 63% total return over four years, the third-best presidential term for investors since 1980, behind Obama and Clinton (https://www.macrotrends.net/2482/sp500-performance-by-president). Interestingly enough though, the President Biden term that followed, by comparison, produced a 62.6% total return from 2020 to 2024. So, was President Trump's term really all that spectacular? Not really, nonetheless, a victory. To counter and probably my lead into a Bear Case, CNN Business (https://nz.finance.yahoo.com/news/trump-stock-market-worst-first-090046133.html) also noted that the 13.3% S&P 500 gain in year one of President Trump's second term was actually the weakest first-year performance of any presidency in twenty years, even though it was a solid gain in absolute terms.
The rally has not been smooth, more like a cardiac telemetry monitor, lol. President Trump's April 2025 Liberation Day tariff announcement triggered a sharp selloff, with the S&P 500 falling nearly 20% by early April 2025 before recovering after tariffs were paused. CNBC reported that, according to Fundstrat (https://www.cnbc.com/2026/05/16/for-better-or-worse-investors-are-living-through-trumps-stock-market-heres-why.html), no U.S. president in nearly fifty years has been responsible for as many of the market's best and worst single-day moves (I could elaborate on that but I will not), and that without the five best days of the term (several driven directly by President Trump's tariff announcements or reversals), the S&P 500 would be up only about 1% since inauguration, rather the 26% posted gain. That is a reminder that headline index gains can mask an unusually turbulent path underneath.
Inflation and bond markets are the other major fault line. Tariff-driven price increases have kept inflation "sticky," with FXStreet (https://www.fxstreet.com/news/us-dollar-on-cautious-footing-ahead-of-cpi-data-202507151152) reporting in mid-2025 that inflation data confirmed tariffs were pushing up consumer prices, complicating the Fed's path to rate cuts, which has now come to fruition. By August 2026, NOTUS (https://www.notus.org/economy/bond-markets-economy-midterms) reported that bond market turbulence had reached levels where things start to break, with the 30-year Treasury yield hitting a nearly two-decade high of 5.3% amid doubts about the Fed's willingness to fight inflation, fueled partly by President Trump's public pressure campaign against the central bank. This is important because, in my opinion, the long yield on bonds is the everlasting truth on economics. In addition to this, the Council on Foreign Relations (https://www.cfr.org/articles/trade-tariffs-and-treasuries-hidden-cost-trumps-protectionism) has separately warned that persistent tariffs raise the risk of both stickier inflation and larger federal deficits, which together could keep long-term bond yields elevated and raise borrowing costs for households, businesses, and the government itself. All to say, this isn't an ideal scenario looking into the future.
Lastly, President Trump's repeated public criticism of the Federal Reserve, and pressure on its leadership over interest-rate decisions, has also drawn scrutiny. The Stanford Institute for Economic Policy Research noted that central bank independence is considered a cornerstone of economic credibility, and that political pressure on the Fed risks a self-fulfilling prophecy of higher inflation expectations if investors come to doubt the central bank's autonomy.
In summary, the honest answer is that "good for markets" depends on the yardstick used. On raw returns, yes, U.S. equities have risen substantially and repeatedly hit record highs. On risk-adjusted terms, the picture is murkier, an unusual number of the largest single-day gains and losses in decades suggests markets have been rewarded for enduring policy-driven volatility, not just for calm compounding. On fixed income and the dollar, the record is more negative, elevated long-term yields (means trouble is potentially coming) a weaker dollar for periods of 2025–2026, and tariff-linked inflation have created headwinds not captured by stock indices alone. Internationally, U.S. outperformance has been less consistent than at home; CNN Business noted that international stocks outperformed U.S. stocks in 2025 for the first time in years.
The market story under President Trump’s second administration is not a simple victory lap or a clean warning sign; it is both. Equity investors have been rewarded with strong headline gains, supported by earnings growth, AI enthusiasm, tax policy, and resilient corporate fundamentals. At the same time, those gains have come with meaningful trade-offs: tariff-driven volatility, sticky inflation, pressure on the Federal Reserve, and elevated long-term bond yields. For investors, the takeaway is less about assigning political credit or blame and more about recognizing that returns are only one part of the equation. The path taken to earn those returns, and the risks absorbed along the way, matter just as much. In other words, markets may have made money, but they certainly did not make it quietly. And if this market were a financial advisor, its closing line would probably be: “Past performance is no guarantee of future returns, but past volatility is apparently very committed to staying in touch.” LOL….
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