In the wake of Donald Trump’s victory in the 47th U.S. Presidential Election, the stock market has experienced a significant surge, often referred to as the “Trump Bump.”
Since Election Day, the S&P 500 has climbed over 6%, while the Nasdaq has seen an impressive increase of more than 8%. These gains reflect investor optimism about the potential impact of Trump’s pro-growth policies on the U.S. economy and stock market.
These returns are particularly impressive, considering they have occurred over just a few months.
But can it last?
Can the ‘Trump Bump’ Last?
Specifically, how big is the “Trump Bump”?
Is it big enough to push stocks 2% higher this year? 5% higher? Perhaps 10% higher?
How big is the Trump Bump, really?
We ran the numbers, and to cut straight to the chase, we see a pathway for the Trump Bump to push stocks almost 30% higher in 2025.
Here’s the math:
We’ve observed two forms of the Trump Bump:
1) A Trump Bump on corporate earnings through more pro-growth policies and tax cuts.
2) A Trump Bump on valuations through increased investor confidence in the economy.
The first one—the Trump Earnings Bump—is worth about a 2% to 4% increase in earnings before considering tax cuts. From November 2016 (when Trump won his first presidential election) to December 2017 (the end of his first year in office), we saw 2017 and 2018 earnings estimates rise about 2% and 4%, respectively.
Organically, it seems Trump’s pro-growth policies were good enough for a 2% to 4% rise in earnings estimates last time around. We think that’s achievable this time around, too.
Meanwhile, there is talk that Trump will reduce the corporate tax rate from 21% to 15%. Goldman Sachs estimates that if he is successful, it could result in a 4% boost to earnings per share (EPS) for the S&P.
In other words, the Trump Earnings Bump over the next few years will likely be a 2% to 4% increase from pro-growth policies and a 4% increase from corporate tax cuts. Altogether, that’s a 6% to 8% increase in earnings estimates. At the midpoint, that would take the current 2026 EPS estimate for the S&P 500 of ~$303 and make it $325 by the end of next year.
The second bump—the Trump Valuation Bump—is worth about a 10% increase in valuation multiples.
Throughout 2016—before Trump took office the first time around—the S&P 500 was consistently trading between 16X and 18X forward earnings. That expanded in Trump’s first year in office, when the S&P 500 consistently traded between 18X and 19X forward earnings. In other words, likely due to increased confidence about the economy, investors pushed up valuations by ~10% the last time Trump was elected.
We think that’s doable this time around, too. Throughout 2024, the S&P 500 has mostly bounced between trading at 20.5X and 22.5X forward earnings. A 10% boost to that implies a ~23.5X forward earnings multiple for stocks under Trump.
If we combine those two Trump Bumps—a 7% Trump Earnings Bump and a 10% Trump Valuation Bump—then we’re looking at 2026 estimated EPS for the S&P 500 of $325 and a 23.5X forward earnings multiple. That combination implies a 2025 target for the S&P 500 of 7,640—or nearly 30% above where the S&P 500 finished 2024.
In other words, if Trump’s second presidency plays out like his first presidency in terms of stock market earnings and valuation impact, stocks could soar ~30% over the next 12 months.
When the Boom Becomes a Bust
Of course, if they do that, the market will likely have run into “bubble territory.”
That’s what we think is most likely to happen: a classic “boom-bust” cycle. Stocks boom in 2025 and likely into 2026 on the back of economic euphoria. Then, something goes awry—maybe reinflation, maybe too much lending, maybe the labor market cracks, maybe too much AI investment and not enough payback—and the boom turns into a bust.
That is what happened in Trump’s first term. Stocks boomed 30% higher from January 2017 to September 2018 before nosediving about 20% from September 2018 to December 2018.
Boom. Bust.
Something similar is likely to happen this time around—especially if the boom in 2025/26 is particularly strong, as we think it could be, given that the Fed is simultaneously cutting rates and that the AI boom remains vigorous.
As such, we think the investment game plan for Trump 2.0 over the next 12 to 24 months is simple: Get fully bullish right now, stay fully bullish for as long as the market keeps trending higher, but be prepared to cash out and play defense as soon as some things start to break (likely in mid-to-late 2026).
For this reason, I put together an exclusive informational presentation in the wake of Donald Trump’s return to the White House and the groundbreaking partnership between his administration and Elon Musk’s ventures. I truly believe this could redefine your investment strategy for 2025 and beyond.
This presentation unpacks:
- Trump’s Policy Predictions: A five-point game plan for how his policies could shape the economic landscape, from tax reforms to infrastructure spending.
- Market Impacts: Analysis of how these policy changes might influence your money over the next four years, including when the boom becomes a bust.
- Investment Opportunities: I point you in the direction of the sectors best positioned for exponential growth, including those directly benefiting from Musk’s projects and Trump’s economic vision.
Considering the unique synergy between these two influential figures, this presentation isn’t just insightful—it’s potentially lucrative. I’ve poured countless hours into ensuring this content not only informs but also directs you toward some of the most promising stock picks for 2025.
Click here to watch now and better navigate this unprecedented political and economic climate.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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