The S&P 500 (^GSPC -1.11%) has enjoyed a nice run since Donald Trump won the presidential race on Nov. 5, 2024. Although the widely followed index pulled back after the Federal Reserve hinted fewer rate cuts might be on the way than expected, it’s now rebounding and is only around 1% below the record high.
How long will the “Trump bump” for the stock market last? Here’s what history shows.
Presidential bumps and slumps
How does the stock market typically react after a new president is elected? And how long does positive momentum last into the new president’s term? There hasn’t been a consistent theme.
Since 1960, we’ve had 10 new incoming U.S. presidents. I didn’t count Lyndon B. Johnson since he served as president after John F. Kennedy’s assassination before winning the presidency in 1964 in what was essentially a reelection. The S&P 500 rose in only half of those cases.
After JFK was elected in 1960, the stock market delivered a strong gain of nearly 9% by his inauguration on Jan. 20, 1961. While the S&P 500 continued to enjoy momentum during the first year of his term, it sank in 1962.
However, there were no bumps after the elections of Richard Nixon in 1968 and Jimmy Carter in 1976. The S&P rose a couple of percentage points following Ronald Reagan’s election in 1980. But the market began a sharp sell-off during the first year of his first presidential term.
George H.W. Bush inherited a strong economy and stock market from Reagan. The S&P 500 increased nearly 5% between his election and inauguration. The honeymoon didn’t last long, though, with a steep market decline in October 1989.
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