S&P 500 First Year Presidential Market Performance: 13.3% Gain Marks Weakest Start Since 2005

The S&P 500’s 13.3% gain during the first year of the current presidential administration represents a significant data point in the historical record of presidential market performance, marking the weakest first-year start since George W. Bush began his second term in 2005-2006 [1]. This performance comes against a backdrop of substantial policy uncertainty, geopolitical tensions, and transformative trade announcements that characterized the 2025 market year. The contrast with previous administrations is stark: during Trump’s first term in 2017, the S&P 500 achieved a 24.1% first-year gain, substantially outperforming the current term’s opening year [2].

Despite the “weakest start in 20 years” characterization, it is crucial to contextualize this performance against the longer-term historical record. The historical median first-year return since 1929 stands at 9%, meaning the 13.3% gain actually exceeds the average by a meaningful margin [2]. This suggests that while the current administration has underperformed relative to recent predecessors, particularly the strong bull markets of the 2017-2024 period, the market has nonetheless delivered solid returns that compare favorably to historical norms.

The 2025 market year was distinguished by pronounced volatility episodes that tested investor resolve and market resilience. The most significant disruption occurred during the spring tariff announcements, colloquially termed “Liberation Day,” when sweeping tariff implementations triggered a near bear-market decline [1]. The S&P 500 experienced a sharp sell-off that brought market participants back to the brink of a 20% drawdown from recent highs, only to see a substantial recovery in subsequent months.

Geopolitical tensions, particularly the “Greenland standoff” and associated international disputes, contributed to extraordinary market stress indicators. The VIX volatility index spiked above 50 during this period, representing the first such extreme reading since the COVID-19 pandemic volatility of 2020 [1]. This spike in implied volatility underscored the market’s sensitivity to geopolitical developments and the potential for policy announcements to generate rapid risk aversion among market participants.

Despite these headwinds, the market demonstrated notable resilience, with the S&P 500 recording 39 all-time highs throughout 2025 [1]. This high frequency of record highs indicates that, despite periods of acute stress, buying pressure ultimately prevailed and pushed the index to new nominal peaks on multiple occasions.

A notable shift in relative performance occurred during 2025, with international stocks outperforming U.S. equities for the first time in several years [1]. This development represents a meaningful departure from the trend of U.S. market dominance that characterized much of the post-pandemic period. The underperformance of domestic equities relative to international counterparts can be attributed to several factors, including the impact of tariff announcements on U.S.-centric corporate earnings expectations, weakness in the U.S. dollar, and the relative valuation differentials between U.S. and international markets.

Safe-haven assets experienced significant demand during periods of market stress, with gold prices exceeding $5,000 per ounce and silver prices rallying substantially [1]. These precious metal gains reflect ongoing investor concerns about currency debasement, geopolitical risk, and the potential for inflation pressures to persist despite periods of market volatility. The simultaneous strength in gold and weakness in the dollar represents a notable divergence that warrants continued monitoring.

The bond market also demonstrated significant dynamics, with mortgage rates declining to multi-year lows [1]. This development provided support to interest-rate-sensitive sectors, particularly real estate and housing-related industries, and contributed to the broader narrative of a market successfully absorbing policy shocks while maintaining constructive momentum.

Examining the full scope of presidential first-year market performance provides essential context for evaluating the 2025 result. The data from Dow Jones Market Data, as cited by multiple financial publications, reveals a pattern of generally positive first-year returns across administrations, with notable variation in magnitude [2][3].

The current 13.3% gain positions the market performance above the historical median of 9% but below the more robust returns observed in recent administrations. Trump’s first term opening year saw a 24.1% gain, while Biden’s first year also produced strong positive returns [2]. This comparison highlights the relative weakness of the current term’s opening year performance without obscuring the fact that positive returns were nonetheless delivered.

The comparison to Bush’s second term inauguration in 2005 is particularly relevant because it represents the last time a president began a term with such modest first-year market gains. Bush’s first term in 2001 began during the aftermath of the dot-com bubble collapse and the uncertainty following the September 11 attacks, making the comparison somewhat imperfect but historically instructive.

The 2025 market year provides compelling evidence of the equity market’s capacity to absorb significant policy shocks while maintaining positive returns. Despite sweeping tariff announcements, geopolitical confrontations, and associated volatility spikes, the S&P 500 delivered returns exceeding the historical median. This resilience suggests that markets have adapted to a higher baseline of policy uncertainty and are capable of pricing in potential regulatory and trade impacts with reasonable efficiency.

The pattern of sharp sell-offs followed by meaningful recoveries became a recurring feature of 2025 market dynamics. Each significant policy announcement triggered initial negative reactions, but buying interest subsequently emerged at lower price levels, indicating that market participants maintained confidence in the fundamental earnings outlook despite headline risks. This behavior aligns with historical patterns where tariff-related market disruptions have typically proven temporary rather than fundamental.

The outperformance of international stocks relative to U.S. equities represents a meaningful shift in market leadership that warrants continued attention. Multiple factors contributed to this dynamic, including the direct impact of tariff announcements on U.S. corporate profit expectations, relative valuation considerations favoring international markets, and dollar weakness that enhanced returns for U.S.-based investors holding international assets.

The NASDAQ Composite’s 16.52% gain and the Russell 2000’s 15.70% advance suggest that market strength was broadly distributed across market capitalizations and sectors [0]. The Dow Jones Industrial Average’s more modest 11.39% gain reflects the sector composition of that index and the relative underperformance of certain large-cap industrial and financial components.

Analyst projections suggest that earnings growth momentum will continue to drive equity prices higher in 2026, providing a fundamental foundation for potential continued market appreciation [5]. This perspective emphasizes the importance of corporate profit trends as the ultimate driver of sustainable market gains, rather than policy announcements or geopolitical developments that may generate short-term volatility without altering the fundamental earnings trajectory.

The expectation of Federal Reserve rate cuts, with projections of two or more cuts anticipated in 2026, provides additional support for the constructive market outlook [1]. Lower interest rates reduce discount rates applied to equity valuations and improve the relative attractiveness of stocks versus fixed income alternatives.

Several risk factors identified in the current market environment warrant careful monitoring by market participants. Policy uncertainty remains elevated, with ongoing tariff implementations, trade negotiations, and potential escalations continuing to introduce volatility into market pricing [1]. The “new tariffs, geopolitical tensions and a metals rally” represent factors that some market participants view with concern, as noted by Ken Mahoney, CEO of Mahoney Asset Management [1].

Geopolitical risk remains a significant consideration, with the potential for developments related to ongoing international disputes to generate renewed volatility spikes. The precedent of VIX exceeding 50 during the “Greenland standoff” demonstrates the market’s sensitivity to geopolitical headlines and the potential for rapid risk aversion flows.

The market’s inability to establish new highs at the year-end represents a technical concern that some analysts view as a potential warning sign for forward momentum. The failure to achieve higher highs at the end of the evaluation period contrasts with the 39 record highs established during the year and may indicate diminishing upside momentum as the year concluded.

Despite identified risks, several factors suggest potential opportunity windows for market participants. The historical pattern of tariff-related market disruptions suggests that initial negative reactions often create buying opportunities rather than fundamental turning points. The sharp rebound from the April tariff-driven sell-off demonstrates this pattern and provides a template for potential future opportunities.

The combination of earnings momentum, anticipated Federal Reserve rate cuts, and relative valuation opportunities in international markets provides a constructive foundation for potential continued market appreciation. The market’s demonstrated resilience under policy uncertainty suggests that participants who maintain investment horizons focused on fundamentals rather than headline risk may be positioned to benefit from continued positive returns.

The third consecutive year of solid gains in 2025 represents a meaningful achievement that demonstrates the durability of the current market cycle [1]. While no market cycle continues indefinitely, the absence of significant fundamental imbalances and the presence of supportive monetary policy suggest that the expansion may have further room to run.

The S&P 500 generated a 13.3% return during the first year of the current presidential administration, marking the weakest first-year presidential market performance since George W. Bush’s second term in 2005-2006 [1][2]. This performance, while below recent predecessors, exceeded the historical median of 9% since 1929. The market demonstrated resilience through significant volatility episodes, including tariff-driven sell-offs and geopolitical tensions that pushed the VIX above 50. International stocks outperformed U.S. equities for the first time in several years, while safe-haven assets including gold and silver experienced substantial gains. Analyst projections for 2026 emphasize earnings growth and anticipated Federal Reserve rate cuts as potential drivers of continued market appreciation, though elevated policy uncertainty and geopolitical risks remain as cautionary factors.