What Are the Chances of a Stock Market Crash During President Donald Trump’s Term in 2026? Three Historical Connections to Consider.

During President Donald Trump’s first term, all three major stock indexes on Wall Street—namely the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite—experienced remarkable growth. They surged by 57%, 70%, and 142%, respectively, during that period.

In 2025, these indexes continued to perform well, with the Dow, S&P 500, and Nasdaq Composite achieving gains of 13%, 16%, and 20%. By the end of December, they had reached new closing highs multiple times throughout that year.

While Trump’s administration has seen substantial gains, it’s important to remember that financial history tends to fluctuate. There are indications that factors like lower interest rates and advancements in artificial intelligence could ignite positive changes for the markets. However, three historically significant patterns suggest a possible major stock correction, or even a crash, could occur under Trump in 2026.

Wall Street’s Historical Patterns

Before diving further, it’s essential to note that no single event or economic data point can definitively dictate short-term market direction. If such a predictor existed, all investors would undoubtedly use it to their advantage.

Nevertheless, certain historical trends have reliably indicated movements in the Dow Jones, S&P 500, or Nasdaq Composite. These correlations can provide investors with valuable insights.

For instance, the S&P 500’s impressive 16% rise last year marked its third consecutive year of at least 15% gains. In a historical context, such a streak has only occurred three times over the last 98 years: during the late 90s dot-com boom, from 2019 to 2021, and from 2023 to 2025.

Fun fact: The S&P 500 has recorded three years of gains of 15% or more—a feat achieved only twice prior, right before the dot-com bubble and from 2019 to 2021.

After a remarkable performance in the late 90s, the dot-com bubble burst led to significant losses—49% for the S&P 500 and a staggering 78% for the Nasdaq Composite. Similarly, the bull market driven by fiscal stimulus from 2019 to 2021 eventually gave way to a bear market in 2022, erasing about a quarter of the S&P 500’s value. Historically, it seems the stock market may be on track for a downward turn.

Another concern is the historical trend during the second year of a president’s second term. There’s a mention of high stock valuations in light of the Shiller price-to-earnings ratio, a point underscored by Howard Marks of Oaktree Capital Management, tapping into worries about the true valuation of Wall Street.

Howard Marks stated, “If you buy the S&P 500 at 23x P/E, your annualized return over 10 years will always range from +2% to -2%.” In layman’s terms, when stock prices are inflated, returns tend to disappoint. As of early January, the S&P 500’s forward P/E ratio was nearing that mark.

The third historical challenge relates to the midterm election year. According to research by Ryan Detrick, chief market strategist at Carson Group, the S&P 500 has witnessed notable corrections during midterm elections, with an average decline of 17.5% since 1950. The drop during Trump’s first term was just shy of 20%.

Prepare for discussions around this. Historically, midterm years often see both the end-of-year highs and significant corrections.

On a positive note, stock prices have historically risen the year after market lows, averaging more than 30% gains since 1950.

Midterm elections often introduce uncertainty, something that typically unnerves investors. With Republicans holding a narrow majority in the House, even minor electoral shifts could disrupt Congress and impede progress during Trump’s remaining term.

While these three patterns do not guarantee a market crash in 2026, collectively they hint at a rising probability of a significant downturn in the upcoming year.