If a country’s central bank loses credibility, it’s the investors who often feel the heat.
Under Donald Trump, the stock market has had an impressive run. Despite moments of wild swings—like the COVID-19 crash in early 2020—the Dow Jones, S&P 500, and Nasdaq have all seen massive gains. Between 2016 and 2020, the Dow jumped about 57%, the S&P rose by 70%, and the Nasdaq skyrocketed by 142%.
Since Trump began his second term on January 20, 2025, these trends have persisted. As of February 18, 2026, these major indexes continued their upward trajectory, with gains of 14%, 15%, and 16%, respectively. This ongoing bull market has been fueled by several factors including the rise of artificial intelligence and quantum computing, alongside policies linked directly to Trump’s administration.
A key legislative move was the Tax Cuts and Jobs Act, which dropped the corporate tax rate from 35% to 21%. This shift allowed companies to retain more of their profits, leading to record stock buybacks—over $1 trillion for 2025 alone. Share buybacks can boost earnings per share, supporting stock prices even in turbulent times.
However, this seemingly sturdy bull market faces challenges. Tariffs and high stock valuations are well-known issues. Yet, a more unexpected threat looms: the Federal Reserve itself.
Historically, the Fed has been a stabilizing force for Wall Street, managing interest rates to achieve economic goals. But lately, it’s shown signs of instability. The Federal Open Market Committee (FOMC) has experienced discord, with various members expressing mixed opinions on future rate changes. Since mid-2025, every FOMC meeting has seen at least one dissent. For instance, during the October and December meetings, there were conflicting perspectives on whether to cut rates or maintain them.
This disarray could carry serious consequences for investors. As noted by several experts, including Anna, a financial analyst on Twitter, the lack of consensus reflects poorly on the Fed. A potential successor to Fed Chair Jerome Powell, Kevin Warsh, could further complicate matters. Warsh’s approach favors a reduction of the Fed’s balance sheet, possibly triggering higher interest rates, which could harm both borrowing and the housing market.
Despite these challenges, long-term investors can find solace in market trends. It’s important to recognize that market cycles tend to favor those with patience. A recent analysis from Bespoke Investment Group revealed that bull markets, like the current AI Bull, tend to last much longer than bear markets. The average bull market lasts around 3.5 times longer than a bear market.
Statistics show that in the last 96 years, only about a third of S&P 500 corrections lasted longer than a year. Conversely, most bull markets typically exceed 1,200 days.
In summary, while short-term volatility may make headlines, history shows that corrections often present great buying opportunities. Optimistic, long-term investors should take note: the fundamentals still suggest a strong outlook for equity markets, despite the current noise.
For more detailed insights about economic trends and the stock market, you can refer to Bespoke Investment Group.
