Is the Trump Bull Market on Its Last Leg? 4 Historically Accurate Indicators Offer a Clear Answer.

From a purely statistical standpoint, Wall Street loves President Donald Trump. During his first term in the White House, the iconic Dow Jones Industrial Average (^DJI 1.05%), widely followed S&P 500 (^GSPC 0.43%), and growth-driven Nasdaq Composite (^IXIC 0.92%) rallied 57%, 70%, and 142%, respectively.

This optimism has continued since Trump’s non-consecutive second term began, with the Dow, S&P 500, and Nasdaq Composite logging respective gains of 12%, 14%, and 15% through the closing bell on Feb. 20, 2026.

President Trump delivering remarks. Image source: Official White House Photo by Joyce N. Boghosian, courtesy of the National Archives.

While most presidents will see the major stock indexes advance during their tenure, the gains observed under Trump have been well above average. This can likely be attributed to record share buyback activity (courtesy of Trump’s Tax Cuts and Jobs Act, which permanently lowered the peak marginal corporate income tax rate from 35% to 21%), better-than-expected corporate earnings, lower interest rates, and the advent of game-changing technologies.

But as history teaches us, bull markets aren’t indefinite.

Although no data point or correlated event can guarantee what’s to come, some have flawless track records of forecasting directional moves in the Dow, S&P 500, and Nasdaq. Four of these historically accurate indicators suggest the Trump bull market may be on its last leg.

Stocks are historically pricey – and that’s a problem

Arguably, the biggest historical red flag for the stock market is its valuation. With the understanding that valuation is typically subjective (i.e., there’s no one-size-fits-all blueprint for valuing a public company), the S&P 500’s Shiller Price-to-Earnings (P/E) Ratio does an excellent job of cutting through this subjectivity.

The Shiller P/E, also known as the Cyclically Adjusted P/E Ratio (CAPE Ratio), is based on average inflation-adjusted earnings over the previous 10 years. Since it factors in a decade of earnings history, it ensures that recessions and shock events (e.g., the February-March 2020 COVID-19 crash) can’t skew its readings.

S&P 500 Shiller PE Ratio hits 2nd highest level in history 🚨 The highest was the Dot Com Bubble 🤯 pic.twitter.com/Lx634H7xKa

– Barchart (@Barchart) December 28, 2025

The CAPE Ratio has been back-tested to January 1871 and has averaged approximately 17.3 over these 155 years. Since October, the Shiller P/E has been vacillating between 39 and 41, making this the second-priciest stock market in history.

Over the last 155 years, the S&P 500’s Shiller P/E has exceeded 30 on six occasions during a continuous bull market, including the present. The prior five occurrences were all eventually followed by drops of 20% to 89% in Wall Street’s major stock indexes.

Though the CAPE Ratio doesn’t offer any assistance in predicting when these declines will begin, the historical message is clear: extended valuation premiums aren’t sustainable.

Midterms are a magnet for market mayhem

History also tells us that midterm election years are often problematic for Wall Street.

Investors favor continuity and transparency above all else. Midterm elections bring uncertainty to Wall Street and tend to make fiscal policy forecasts murky. According to Carson Group’s Chief Market Strategist, Ryan Detrick, the party in the White House has lost seats in Congress in 20 of the last 23 midterms.

Get ready to hear a lot about this, but midterm years tend to see their ultimate low later in the year and have some of the largest intra-year corrections.

The good news? Since 1950, off those lows stocks have never been lower a year later and up more than 30% on average. pic.twitter.com/WuWr8vWCJN

– Ryan Detrick, CMT (@RyanDetrick) November 16, 2025

Republicans entered 2026 with a modest majority in the Senate and a very slim majority in the House of Representatives. It wouldn’t take much for a shift in voting to swing the pendulum to a divided Congress for the second half of Trump’s term. If that were the case, no major legislation would be expected to pass.

Detrick has also noted that midterm years have led to larger stock market corrections than other years in a president’s term. The average S&P 500 drawdown during midterm years is 17.5%, with a nearly 20% pullback during Trump’s first, non-consecutive term.

A $7.8 trillion warning to Wall Street looms large

The third historically accurate indicator that’s sounding alarm bells for the Trump bull market is the sheer amount of capital being directed toward money market funds. Money market funds are a type of mutual fund that invests in super-safe assets, such as short-term Treasury bills, certificates of deposit (CDs), and municipal bonds.

Typically, investors will pile into money market funds when they’re worried about the state of the U.S. economy and/or stock market. However, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all hit record-closing highs over the last four months – and so has the total amount held in money market funds ($7.77 trillion).

$7.8 Trillion is now sitting in Money Market Funds, a new all-time high 🚨🚨 pic.twitter.com/kkKfkW5G4j

– Barchart (@Barchart) January 15, 2026

What makes this influx of capital into money market funds even more of a head-scratcher is that it’s occurring with the Federal Reserve in the midst of a rate-easing cycle. When the nation’s central bank aggressively tackled a sizable uptick in inflation by raising the federal funds target rate by 525 basis points between March 2022 and July 2023, it made sense for investors to pile into money market funds to take advantage of rising interest rates. But with yields now falling, cash inflows into money market funds haven’t stopped climbing.

We’re likely witnessing tangible evidence of investor skepticism. Regardless of whether they’re worried about an artificial intelligence bubble-bursting event, tariff uncertainty, or some other factor, significant increases in money market fund assets have often preceded recessions and other shock events.

Margin debt paints a worrisome picture for the Trump bull market

Lastly, outstanding margin debt tells quite the worrisome story. Margin is capital that investors borrow from their broker to invest (i.e., when short-selling or leveraging an investment).

Margin is something of a double-edged sword for investors. Borrowing investment capital can magnify gains if you’re correct, but also amplify your losses if you’re wrong. On top of owing interest on money borrowed from a broker, being wrong leaves investors open to a potential margin call if they lack the assets to keep a levered position open.

Margin Debt increased +42% in the past 7 months. Investors went all-in.

This only happened 5 times before, and the S&P 500 was lower 1 year later every time.

The last 2 times? February 2000 & May 2007 pic.twitter.com/iO3emr8M0O

– Subu Trade (@SubuTrade) December 17, 2025

According to data-driven research account SubuTrade on X (formerly Twitter), there have been six instances since 1957 where outstanding margin debt has risen by at least 42% over a rolling seven-month period. The previous five occurrences all saw the S&P 500 lower one year later.

Margin debt is a historically accurate emotion-driven indicator. When retail investors chase a steadily rising stock market with borrowed capital, it rarely ends well – at least in the short term.

Image source: Getty Images.

Wall Street’s historical silver lining

While a confluence of historically accurate indicators spells trouble for the Trump bull market, things aren’t as dire as these data points and correlated events would indicate. Depending on your investment horizon, history can be your foe or your greatest ally.

Statistically, there’s a heightened probability of a stock market correction, bear market, or even elevator-down move in the presumed not-too-distant future. While red arrows are known to tug on investors’ heartstrings, moves lower in the broader market are a normal part of the investing cycle and akin to the price of admission to the world’s greatest wealth creator.

But the fundamental fact about stock market cycles is that they’re not linear. The vast majority of corrections, bear markets, and crash events have been short-lived. Yes, they can be temporarily unnerving, but they often pass quickly.

According to analysts at Bespoke Investment Group, the average S&P 500 bear market since the start of the Great Depression (September 1929) has lasted just 286 calendar days, with only nine of 27 bear markets reaching the one-year mark.

The current bull market – the “AI Bull” – has eclipsed the 1,200-day mark. This is the 10th bull market to last 1,000+ days based on the 20% rally/decline threshold.

Bear markets, on average, are much shorter, at just 286 days, with the longest being 630 days back in… pic.twitter.com/ds7lqWWHFh

– Bespoke (@bespokeinvest) February 10, 2026

In comparison, the typical S&P 500 bull market has persisted for 1,011 calendar days (about 3.5 times as long as the average bear market), with 14 of 27 bull markets lasting longer than the lengthiest bear market (630 calendar days) since September 1929.

Statistically, every significant stock market downturn has been a buying opportunity for investors with a long-term mindset. The eventual end to the Trump bull market is unlikely to be any different.