Is a Stock Market Crash Likely Under President Donald Trump? History Weighs In With an Answer Wall Street May Not Like.

Just like peanut butter and jelly, outsize stock market returns have gone hand in hand with Donald Trump's presidency. Though there have been plenty of periods of heightened volatility, the annualized returns of the Dow Jones Industrial Average (DJINDICES:^DJI), S&P 500 (SNPINDEX:^GSPC), and Nasdaq Composite (NASDAQINDEX:^IXIC) have been higher under Trump than under most other presidents since the late 1890s .

While some of Wall Street's prime catalysts have developed organically, such as the evolution of artificial intelligence (AI), Wall Street's bull market rally has also been influenced by the president's policies. For instance, the Tax Cuts and Jobs Act (signed into law in December 2017) permanently lowered the peak marginal corporate income tax rate to 21%, leading to a surge in buyback activity from S&P 500 companies.

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The Trump bull market may be running on borrowed time. Image source: Official White House Photo by Daniel Torok.

But with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite soaring to several new highs in 2026, it's fair to question whether the Trump bull market is nearing an elevator-down event.

While past events can't guarantee what's to come on Wall Street, history has a knack for foreshadowing the future. According to two (thus far) surefire historical precedents, the likelihood of a stock market crash under President Donald Trump is rapidly climbing.

At any given time, headwinds threaten to pull the rug out from beneath investors. Arguably, no historical headwind is more pronounced at the moment than premium stock valuations.

The tricky thing about valuing stocks and/or the broader market is that there's no perfect blueprint. There's always some degree of subjectivity or emotion involved in the valuation process, which is what makes accurately forecasting short-term moves in the Dow, S&P 500, and Nasdaq Composite so challenging.

Thankfully, the S&P 500's Shiller Price-to-Earnings (P/E) Ratio, also known as the Cyclically Adjusted P/E Ratio (CAPE Ratio), resolves this issue. The Shiller P/E is based on average inflation-adjusted earnings over the previous decade, and it's been backtested nearly 156 years. In other words, it can provide investors with the closest thing they'll get to an apples-to-apples valuation comparison of Wall Street's benchmark stock index, the S&P 500.