From a purely data-based standpoint, the stock market has been practically unstoppable with Donald Trump in the White House. Although there have been periods of historic volatility, such as the five-week COVID-19 crash in February-March 2020, the ageless Dow Jones Industrial Average (^DJI 1.56%), benchmark S&P 500 (^GSPC 1.52%), and technology-driven Nasdaq Composite (^IXIC 1.78%) soared 57%, 70%, and 142%, respectively, during Trump's first term.
The stock market's outperformance has continued since President Trump's second, non-consecutive term began on Jan. 20, 2025, with the Dow, S&P 500, and Nasdaq climbing by 14%, 15%, and 16%, respectively, as of the closing bell on Feb. 18, 2026.
This Trump bull market has been fueled by an assortment of factors, such as the rise of artificial intelligence and the advent of quantum computing, as well as policies and proposals directly linked to Trump.
President Trump delivering remarks. Image source: Official White House Photo by Andrea Hanks, courtesy of the National Archives.
For example, the Tax Cuts and Jobs Act (Trump's flagship tax and spending law from his first term) permanently lowered the peak marginal corporate income tax rate from 35% to 21%, the lowest level since 1939. With businesses keeping more of their income, it's led to record share buybacks from S&P 500 companies -- more than $1 trillion estimated for 2025. Share repurchases can increase earnings per share for public companies with steady or growing net income.
Although the Trump bull market may appear infallible, several headwinds are threatening to pull the rug out from beneath it. While some of these catalysts are well known, such as tariff-related uncertainty and historically high stock valuations, the eventual undoing of the Trump bull market may be a surprise culprit: the Federal Reserve.
America's foremost financial institution is a powder keg of potential problems for Wall Street
Normally, the Federal Reserve is Wall Street's financial bedrock. It's America's foremost financial institution tasked with maximizing employment and stabilizing prices. It achieves these goals by adjusting the federal funds target rate -- the overnight lending rate between financial institutions -- and/or conducting open-market operations, such as buying or selling U.S. Treasury bonds. It's a straightforward task guided by copious amounts of economic data.
While "calming" and "boring" are two descriptors that can commonly be used to describe the Fed's approach, we've witnessed this financial backbone of the stock market turn into a liability before our eyes over the last seven months.
Nothing is more important to Wall Street than Federal Reserve credibility. Since the Federal Open Market Committee (FOMC) -- the 12-person body, including Fed Chair Jerome Powell, responsible for setting the nation's monetary policy -- uses backward-looking data to form its decisions, it's commonly behind the curve when making monetary policy adjustments. Investors have demonstrated a willingness to accept this tardiness and even mistakes... with one caveat: that members of the FOMC have a unified vision.
Anna is correct below when she says:
-- Jim Bianco (@biancoresearch) September 17, 2025
"I have not seen a meeting with so much contradictions."
---
This meeting was a mess.
See the labels in the dot plot below.
One member of the FOMC thinks the Fed is going to HIKE rates this year. One (Stephen Miran) thinks it is going to cut... https://t.co/TRUQmD5I2E pic.twitter.com/qPlJGL57ln
Since July 2025, this shared vision has been thrown out the window. All five FOMC meetings since the midpoint of last year have featured at least one dissent. Moreover, the October and December meetings had dissents in opposite directions. Even though the FOMC voted to cut the interest rates by 25 basis points in both meetings, at least one member favored no reduction, while another pushed for a 50-basis-point cut. There have been only three FOMC meetings since 1990 with opposite dissents, and two have occurred since late October.
If there's a lack of clarity and cohesion at the Fed, it's Wall Street and investors that pay the price.
Unfortunately, a historic level of division at the FOMC is only part of the problem. Jerome Powell's term as Fed chair ends on May 15, and President Trump's nominee to replace him, Kevin Warsh, may stir the pot even more.
Warsh previously served on the FOMC during the financial crisis and has been a harsh critic of the Fed's $6.6 trillion balance sheet, mainly comprised of U.S. Treasury bonds and mortgage-backed securities (MBS). Warsh would prefer that the central bank assume a passive oversight role and deleverage its balance sheet.
The potential issue is that selling Treasury bonds and MBSs would be expected to increase interest rates and make borrowing/mortgages costlier. Higher lending costs and a weaker housing market would be problematic for the Trump bull market.
Image source: Getty Images.
The nonlinearity of stock market cycles strongly favors optimistic, long-term investors
Although the above paints a dire picture for the Trump bull market, perspective is a powerful tool for investors on Wall Street.
At some point, the current bull market will end. Stock market corrections, bear markets, and even crashes are normal and inevitable aspects of the investing cycle. Since moves lower in the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite are often fueled, in part, by investors' emotions, there's nothing the Fed, federal government, or Wall Street can do to stop these events from happening.
But what investors can do is take a step back and examine the nonlinearity of stock market cycles.
On Feb. 10, analysts at Bespoke Investment Group published a comprehensive data set on X (formerly Twitter) comparing the length of every S&P 500 bull and bear market since the start of the Great Depression (September 1929). What this analysis showed was the night-and-day difference between often fundamentally driven bull markets and typically emotion-driven bear markets.
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
There have been 27 downturns of at least 20% in the S&P 500 over the last 96 years. Only a third of these declines reached the one-year mark, while the average bear market lasted just 286 calendar days (about 9.5 months).
By comparison, 10 of 27 S&P 500 bull markets have persisted for more than 1,200 calendar days. What's more, the average bull market has stuck around for 1,011 calendar days, or roughly 3.5 times longer than the typical bear market.
What this data set conclusively shows is that corrections and bear markets are generally short-lived and represent phenomenal buying opportunities for optimistic, long-term investors. While the Fed looks to be a powder keg of problems for the stock market right now, the long-term outlook for equities remains as strong as ever.
