From a purely data-based perspective, the stock market has been nearly unstoppable since Donald Trump entered the White House. Despite historic periods of volatility, such as the five-week COVID-19 crash in February-March 2020, the Eternal Dow Jones Industrial Average(DJINDICES: ^DJI)benchmark S&P 500 Index(SNPINDEX:^GSPC)and technology driven Nasdaq Composite Index(NASDAQ: ^IXIC) During Trump’s first term, they soared 57%, 70% and 142% respectively.
The stock market’s outperformance has continued since President Trump began his second non-consecutive term on January 20, 2025, with the Dow, S&P 500 and Nasdaq up 14%, 15% and 16%, respectively, as of the close on February 18, 2026.
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Trump’s bull run has been driven by a variety of factors, such as the rise of artificial intelligence and the emergence of quantum computing, as well as policies and proposals directly related to Trump.
President Trump delivers a speech. 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 since his first term) permanently lowered the top marginal corporate income tax rate from 35% to 21%, the lowest level since 1939. Stock buybacks by S&P 500 companies hit a record high and are expected to exceed $1 trillion by 2025 as companies retain more of their earnings. Stock buybacks can increase earnings per share for listed companies with stable or growing net assets. income.
While Trump’s bull run appears to be foolproof, a number of headwinds are threatening its collapse. While some of these catalysts are well-known, such as tariff-related uncertainty and historically high stock valuations, the ultimate undoing of the Trump bull market may be a surprising culprit: the Federal Reserve.
Normally, the Federal Reserve is Wall Street’s financial backbone. It is the most important financial institution in the United States, and its mission is to maximize employment and stabilize prices. It achieves these goals by adjusting the federal funds target rate (the rate on overnight loans between financial institutions) and/or by conducting open market operations (such as buying and selling U.S. Treasury securities). It’s a simple task guided by a wealth of economic data.
While “calm” and “boring” are two adjectives commonly used to describe the Fed’s approach, over the past seven months we have watched this financial pillar of the stock market turn into a liability before our eyes.
Nothing is more important to Wall Street than the Fed’s credibility. Because the Federal Open Market Committee (FOMC), a 12-member body that includes Fed Chairman Jerome Powell, who sets the nation’s monetary policy, uses retrospective data to make decisions, it is often behind the curve when it comes to making monetary policy adjustments. Investors have shown a willingness to accept such delays and even mistakes…but there’s a caveat: FOMC members share a unified vision.
Since July 2025, this shared vision has been thrown out the window. There has been at least one dissent at all five meetings of the Federal Open Market Committee (FOMC) since the middle of last year. In addition, dissent in the opposite direction emerged at the October and December meetings. Although the FOMC voted to cut interest rates by 25 basis points at both meetings, at least one member did not favor a rate cut, while another advocated for a 50 basis point cut. Since 1990, there have been only three FOMC meetings with contrary dissent, two of which were held since the end of October.
If the Fed lacks transparency and cohesion, Wall Street and investors will pay the price.
Unfortunately, the historic disagreement at the FOMC is only part of the problem. Jerome Powell’s term as Fed chairman ends on May 15, and President Trump’s nominee to replace him, Kevin Warsh, could stir things up even more.
Warsh, who previously served on the Federal Open Market Committee (FOMC) during the financial crisis, has been harshly critical of the Fed’s $6.6 trillion balance sheet, which consists primarily of U.S. Treasuries and mortgage-backed securities (MBS). Warsh would prefer the central bank to play a passive supervisory role and deleverage its balance sheet.
The potential problem is that the sale of Treasury bonds and mortgage-backed securities is expected to raise interest rates and make borrowing/mortgage more expensive. Higher loan costs and a weak housing market will cause problems for the Trump bull market.
Image source: Getty Images.
While the above paints a dire picture for the Trump bull market, perspective is a powerful tool for Wall Street investors.
At some point, the current bull market will The end. Stock market corrections, bear markets and even crashes are normal and inevitable aspects of the investment cycle. Because declines in the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite are often driven in part by investor sentiment, there is nothing the Fed, federal government or Wall Street can do to prevent these events from happening.
But what investors can do is take a step back and examine the nonlinearities of the stock market cycle.
On February 10, analysts at Bespoke Investment Group posted a comprehensive data set on X (formerly Twitter) comparing the duration of S&P 500 bull and bear markets since the beginning of the Great Depression (September 1929). This analysis shows that there is a night-and-day difference between bull markets, which are typically driven by fundamentals, and bear markets, which are typically driven by sentiment.
Over the past 96 years, the S&P 500 has fallen at least 20% 27 times. Only one-third of these declines reach the one-year mark, and the average bear market lasts only 286 calendar days (approximately 9.5 months).
By comparison, 10 of the S&P 500’s 27 bull markets lasted longer than 1,200 calendar days. What’s more, the average bull market lasts 1,011 calendar days, about 3.5 times longer than a typical bear market.
This data set conclusively shows that corrections and bear markets are often short-lived and represent huge buying opportunities for optimistic long-term investors. While the Fed currently appears to be a powder keg of problems for the stock market, the long-term outlook for stocks remains as strong as ever.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Prediction: The Trump bull market is coming to an end—and the Fed will be the unexpected culprit Originally published by The Motley Fool
