The data doesn't lie: Wall Street has thrived with President Donald Trump in the White House.
Although a rising stock market is relatively normal, regardless of the political party in power, aggregate stock returns under Trump have been above average. During his first non-consecutive term, the widely followed Dow Jones Industrial Average (^DJI 1.56%), benchmark S&P 500 (^GSPC 1.52%), and innovation-inspired Nasdaq Composite (^IXIC 1.78%) soared by 57%, 70%, and 142%, respectively.
President Trump seated in the Oval Office. Images source: Official White House Photo.
These outsize returns have continued in President Trump's second term. Since his inauguration on Jan. 20, 2025, the Dow, S&P 500, and Nasdaq Composite have respectively rallied by 14%, 14%, and 15%.
But as Wall Street's major stock indexes have ascended to new heights, so have the potential headwinds threatening to pull the rug out from beneath this supercharged bull market. The question on most investors' minds is: Will a stock market crash take place in 2026 under Donald Trump? While no one can definitively answer this question, a few time-tested data points have clued investors in on what they can likely expect in the not-too-distant future.
Headwinds are mounting for a historically expensive stock market
Although back-tested data sets and correlated events can't guarantee what's to come, they do help remove emotion from the equation, thereby allowing investors to view the stock market objectively. Two data-driven events, in particular, point to an increased likelihood that the Dow, S&P 500, and Nasdaq Composite will endure significant declines in 2026.
To begin with, the S&P 500's Shiller Price-to-Earnings (P/E) Ratio is nearing uncharted territory. The Shiller P/E, also referred to as the Cyclically Adjusted P/E Ratio, or CAPE Ratio, is based on average inflation-adjusted earnings over the prior 10 years. Incorporating a decade of earnings history into its calculation ensures that recessions and shock events can't render this valuation tool useless.
S&P 500 Shiller PE Ratio hits 2nd highest level in history 🚨 The highest was the Dot Com Bubble 🤯 pic.twitter.com/Lx634H7xKa
-- Barchart (@Barchart) December 28, 2025
Though the Shiller P/E wasn't introduced until the late 1980s, it's been back-tested to January 1871. Over this 155-year period, the CAPE Ratio has averaged approximately 17.3. But for the last three months, it's vacillated between 39 and 41. The only time the Shiller P/E has been higher than it is now is in the lead-up to the bursting of the dot-com bubble.
The Shiller P/E isn't particularly helpful in identifying when corrections will begin. However, the five previous occurrences spanning 155 years in which it exceeded 30 during a continuous bull market were eventually followed by declines of 20% or greater in the Dow, S&P 500, and/or Nasdaq Composite. What the CAPE Ratio conclusively shows is that extended valuation premiums aren't tolerated over long periods on Wall Street. This is one of the stock market's red flags -- and the data doesn't lie.
The other potentially worrisome data-driven event is the upcoming midterm elections in November.
President Trump began his second term with a unified government -- Republicans hold majorities in the House and Senate. However, the party of a sitting president frequently loses seats in one or both houses of Congress during midterm elections. With the GOP holding a slim majority in the House, it wouldn't take much of a shift in voting to create a split Congress. A divided Congress would likely eliminate the president's chance of signing any additional major legislation during his second term.
Get ready to hear a lot about this, but midterm years tend to see their ultimate low later in the year and have some of the largest intra-year corrections.
-- Ryan Detrick, CMT (@RyanDetrick) November 16, 2025
The good news? Since 1950, off those lows stocks have never been lower a year later and up more than 30% on average. pic.twitter.com/WuWr8vWCJN
According to data collected by Carson Investment Research and published on X (formerly Twitter) by Chief Market Strategist Ryan Detrick, stock market corrections tend to be larger during midterm years than any other year of a president's term.
Since 1950, the average peak-to-trough downturn during midterm years in the S&P 500 has been 17.5% (i.e., within striking distance of a bear market). What's more, the S&P 500 fell nearly 20% during midterms in President Trump's first term.
The data demonstrates that Wall Street dislikes pricey stock markets and fiscal uncertainty. While both of these time-tested data sets point to a heightened likelihood of a stock market correction or perhaps even a bear market in 2026, neither indicates that a stock market crash is imminent or even brewing. Since history tends to rhyme on Wall Street, investors should expect a pullback in stocks at some point, but shouldn't be overly concerned with rumblings of a stock market crash.
Image source: Getty Images.
The data doesn't lie: Patience pays off handsomely on Wall Street
While decades, if not more than a century, of data point to potential stock market weakness in 2026, history offers an entirely different outlook for investors focused on the horizon.
On the one hand, stock market corrections, bear markets, and those pesky elevator-down moves that pull on investors' heartstrings are normal and inevitable events. Since stock market downturns are often driven, in part, by emotion, there's nothing the federal government or Federal Reserve can do to avoid this part of the investing cycle.
But what history teaches is that stock market cycles aren't mirror images of each other. Despite corrections, bear markets, and crashes being inevitable and representing the price of admission to the world's greatest wealth creator, bull markets and periods of optimism last substantially longer.
Less than two weeks ago, analysts at Bespoke Investment Group refreshed a data set that examined the length of every S&P 500 bull and bear market, dating back to the beginning of the Great Depression (September 1929).
The current bull market -- the "AI Bull" -- has eclipsed the 1,200-day mark. This is the 10th bull market to last 1,000+ days based on the 20% rally/decline threshold.
-- Bespoke (@bespokeinvest) February 10, 2026
Bear markets, on average, are much shorter, at just 286 days, with the longest being 630 days back in... pic.twitter.com/ds7lqWWHFh
Among the 27 bear markets that have occurred over the last 96 years, just a third have reached the one-year mark, with none surpassing 630 calendar days. Further, the average bear market has hit its trough after 286 calendar days, or approximately 9.5 months. In other words, when significant downturns do occur, they tend to resolve quickly -- especially during stock market crashes.
In comparison, 10 S&P 500 bull markets, including the current one, have lasted longer than 1,200 calendar days. The typical bull market climb has endured for 1,011 calendar days, which is roughly 3.5 times longer than the average bear market.
Even without knowing when stock market corrections will begin or how steep the decline will be, nearly a century of data conclusively shows that maintaining optimism and being patient is the formula for growing your wealth on Wall Street.
