Honestly, trying to guess what the stock market is going to do is usually a fool's errand. But when you throw a 47th presidency into the mix, it’s like trying to predict where a firework will land after it hits a power line. We’ve already seen the first act of this play. Since the inauguration on January 20, 2025, the S&P 500 has climbed about 16%. That’s not a typo. Despite all the doomsday predictions about trade wars and "inflationary bombs," the market has basically shrugged and kept climbing.
But here’s the thing: we are now entering 2026, and the "honeymoon" phase is officially over. If you’re asking what will happen to the stock market if Trump wins—well, he did win, and now we’re living in the results. The 2025 "Trump Bump" was real, but 2026 is shaping up to be the year where the "heavy lifting" starts. Historically, the second year of a presidential term is the most volatile. It’s when the reality of policy hits the spreadsheet.
The Tariff Roller Coaster and Your Portfolio
Let’s talk about the elephant in the room: tariffs. Back in April 2025, the administration signed executive orders for "reciprocal" tariffs. The market didn't like it. The S&P 500 took a nasty dive that month, hitting its lowest point of the year. But then, something weird happened. The administration paused some of the most aggressive hikes to move toward bilateral negotiations.
Investors loved the pivot. The market surged nearly 40% from those April lows. By the time we hit January 2026, the average effective tariff rate is hovering around 12%.
Some folks, like the team at the Yale Budget Lab, think that rate could climb to 14.4% this year. For you, that means a split-screen reality. Companies that rely on cheap Chinese parts or imported lumber—basically anyone in retail or home building—are feeling the squeeze. But for domestic "Made in America" plays? They’re having a moment.
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Winners and Losers in the "Trump 2.0" Economy
If you've been watching the tickers lately, you've probably noticed that not all green is created equal. The 2024 victory created a very specific set of winners.
- Big Banks: They are absolutely winning. With Treasury Secretary Scott Bessent pushing for "looser" regulations, banks like JPMorgan Chase and Morgan Stanley have been outperforming the broader market. They don't have to hold as much capital as they used to, which means more money for lending and buybacks.
- Defense Contractors: Trump’s push for NATO members to spend 5% of their GDP on defense—up from the old 2%—has been a goldmine for companies like Lockheed Martin. Throw in the tensions in Venezuela and the Greenland headlines, and defense stocks are up roughly 71% since the election.
- Gold Miners: This one surprised a few people. Usually, a strong presidency means a strong dollar, but gold has soared 70% since Trump returned to the White House. People are using it as a "haven" because they’re nervous about the long-term debt.
On the flip side, oil hasn't been the slam dunk everyone expected. Even with the "drill, baby, drill" rhetoric, excess supply has kept prices lower than producers would like. If you bought the "oil is a lock" narrative in late 2024, you're probably looking at a sea of red right now.
The "One Big Beautiful Bill" and the Debt Dilemma
Last year, the administration passed the "Working Families Tax Cut Act" (or the "One Big Beautiful Bill," depending on who you ask). It basically doubled down on the 2017 tax cuts. It also restored immediate expensing for R&D costs.
For the stock market, this was like a shot of espresso. Corporate earnings are expected to grow by about 15.5% in 2026. Tech companies, in particular, are using those tax savings to fuel the AI boom. Wall Street analysts are actually calling for the S&P 500 to hit 8,000 or even 9,000 by the end of this year if the AI productivity gains are as big as promised.
But there is a "but." A big one.
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The Congressional Budget Office (CBO) says this bill will add $3.4 trillion to the national debt over the next decade. Bond markets are already getting twitchy. The 10-year Treasury yield has been hovering around 4.0%, and if investors start demanding higher yields to compensate for the debt risk, it could eventually put a ceiling on how high stocks can go.
Midterm Volatility: The 2026 Curse?
We have to talk about the "Presidential Election Cycle Theory." Since 1940, the second year of a term has only seen an average gain of 4.2% for the S&P 500. Compare that to the 16% we just had in 2025.
Why the slump? Because the 2026 midterm elections are coming. Right now, Trump's approval ratings are sitting in the high 30s, and there's a real chance the Republicans lose control of the House. Markets hate uncertainty. If we end up with a "divided government" by November 2026, the era of easy legislating is over. Expect the "intra-period volatility" to be high this summer. You’re going to see some wild swings based on nothing but polling data.
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What You Should Actually Do Now
Look, the "Trump Trade" isn't a single thing. It's a series of shifting priorities. If you're trying to figure out what will happen to the stock market if Trump wins (and stays winning), you need a plan that isn't just "buy everything."
- Watch the Fed, Not Just the White House: Jerome Powell’s term ends in 2026. Trump has already hinted he might want someone else in that chair. If the Fed stops being independent and starts cutting rates just to please the administration, inflation could come roaring back. Keep an eye on those CPI prints.
- Trim the "Tariff Sensitive" Stocks: If your portfolio is heavy on retailers like Target or companies that import heavily from the "57 targeted nations," you might want to lock in some profits. The "effective" tariff rate is only going up as old inventories run out.
- The AI Shield: Technology and Communications are still the engines. Even with political drama, the 30% earnings growth projected for the IT sector in 2026 is hard to ignore. Use the "midterm dips" as an opportunity to buy the big players like Nvidia or Microsoft at a discount.
- Hedge with "Havens": Gold and defense stocks aren't just for doomsdayers anymore. In a 2026 marked by "bilateral negotiations" (a fancy word for trade fights), these have proven to be the most resilient parts of the market.
Basically, 2026 is the year of the "reality check." The euphoria of 2025 has been priced in. Now, we have to see if the earnings can actually keep up with the debt and the trade friction. It's going to be a bumpy ride, but for the patient investor, those bumps usually look like buying opportunities in the rearview mirror.
Next, you might want to look into the specific companies listed in the "One Big Beautiful Bill" as beneficiaries of the R&D tax credits to see which ones are reinvesting that cash into AI infrastructure.