The Rise and Fall of the Market’s Trump Card: How the ‘Trump Bump’ Became the Trump Slump

When Donald Trump Won the Presidential Election

When Donald Trump won the presidential election last November, the markets reacted positively. His deregulatory platform and perceived business acumen translated into strong performances across the board, propelling stocks into the new year.

Initial Rally Proves Short-Lived

From the election through Jan. 21, when the markets reopened after Inauguration Day, the Dow Jones Industrial Average gained 5.34%, S&P 500 gained 5.9%, and the Nasdaq gained 8.67%. The so-called “Trump bump” was grabbing headlines and appeared to be giving the bull market – which began in late 2022 – staying power. However, that rally proved to be short-lived.

Tariffs Tanked the Markets

Last week, the Wall Street Journal reported that the S&P 500’s performance since Inauguration Day was the worst for any president up to that point going back to 1928. The Journal also reported that the index was on track for its worst April – a month that historically sees strong stock performances – since 1932. After the S&P 500 hit its all-time high on Feb. 19, the index went on to lose 10.13% through March 13 in anticipation of Trump’s tariff announcement. Then, after a brief gain, those losses accelerated in the beginning of April.

The Impact of Trump’s Tariffs on the Stock Market

As investors continue waiting for the president to fulfill his promise of an economic “boom like no other,” here’s how the Trump bump devolved into the Trump slump. The 90-day tariff pause is further contributing to an already clouded outlook. The American Association of Individual Investors’ sentiment survey shows that bullishness has now been below its historical average for 15 out of the past 17 weeks, while bearish sentiment has increased 101.66% since Trump won the election.

Expect More Muddled Markets

Because of current uncertainty, the market’s correction and any potential timeline for recovery are difficult to gauge against other historic instances. “This is self-inflicted,” Rewey says. “In that sense, it’s different than the COVID crisis or from the 2007-2009 financial crisis. Because this can be undone with backtracking.” But in the absence of clarity, the fallout from Trump’s tariffs and his lambasting of Powell have resulted in fallout that has led economists to adjust the likelihood of a recession this year.
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