Since President Donald Trump's second-term inauguration, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have gained 23%, 28%, and 32%, respectively, as of Aug. 24. These gains, however, come amid historic volatility and growing concerns about the sustainability of the administration's interventionist investment strategy.
Market Performance and Volatility
During Trump's first term, the Dow, S&P 500, and Nasdaq gained 57%, 70%, and 142%, respectively. The current term has seen significant swings, including a 34% drop in the S&P 500 during the COVID-19 crash in 33 calendar days and a more than 10% loss over two trading sessions in early April 2025, dubbed the "tariff tantrum."
According to a data set published by Carson Group's Chief Market Strategist Ryan Detrick, which examined S&P 500 performance following more than three dozen geopolitical or major market shock events since 1940, the index gained 3% on average one year after such events and was higher 65% of the time. However, historical precedents show varied outcomes. For instance, the S&P 500 was lower by 12% one year after the Suez Crisis began in 1956, and it lost 35% in the year following the 1973 oil embargo.
Geopolitical Risks and Inflation
Trump's second term has been marked by major geopolitical events, including the April 2025 tariff announcement, S. strikes on Iranian nuclear facilities in June 2025, and military operations in Venezuela in early January 2026. Iran's closure of the Strait of Hormuz to virtually all maritime traffic, halting movement of about 20% of the world's petroleum liquids, represents the largest energy supply disruption in modern history. Energy supply shocks are the one type of geopolitical event Wall Street struggles to recover from, according to analysis.
Inflation remains a concern. Core Personal Consumption Expenditures (PCE) inflation has stayed around 4% for several months, excluding food and energy. Rising inflation makes outsized stock market gains less likely, analysts say.
Government Investment Strategy Under Scrutiny
With midterm elections approaching and polls suggesting the Democratic Party is likely to win a majority in at least one house of Congress, market strategists see rising risks that the administration's equity positions will face scrutiny in Washington and the courts. Matt Gertken, who leads geopolitical and S. political analysis for BCA Research, noted, "There is a sort of interventionist approach that is not fully litigated and mediated in the American system yet. So there's going to be ups and downs in that process."
The government's involvement has lifted stock prices of many companies in which it has taken stakes. Intel Corp. shares have soared over 300% in the year since the initial report that the Trump administration was in talks to take an ownership stake. MP Materials Corp. is up 87% since last July, when the Department of Defense made a $400 million equity investment. Trilogy Metals Inc. has gained 73% since October, when the S. government agreed to take a 10% stake.
However, those gains have been uneven. Trilogy Metals' S. shares jumped from 09 to a high of 60 within days of the deal announcement, then gave up those gains and now trade for 62. MP Materials soared more than 150% within five weeks of the government taking a stake, but it's down nearly 27% in the year since. Intel is down 37% since its June peak, the fifth worst performance in the S&P 500.
Legal and Political Challenges
Democratic Senator Elizabeth Warren has written to Commerce Secretary Howard Lutnick questioning the Intel investment. Party leaders are laying groundwork to investigate companies with ties to the Trump administration and the president's family. Henrietta Treyz, co-founder of Veda Partners, expects Democratic-run committees to summon executives and officials.
Intel, Trilogy Metals, and USA Rare Earth Inc. declined to comment; Trilogy cited the process of closing the deal. The Commerce Department and other companies mentioned did not respond to requests for comment.
An Intel shareholder suit argues the Chips Act doesn't give the government authority to demand an equity position. Lutnick has asked the court to dismiss the case, saying the arrangement is authorized under federal law. Intel CEO Lip-Bu Tan and other board members also moved to dismiss the case.
Josh Lipsky, senior director of the Atlantic Council's GeoEconomics Center, commented on the potential ramifications of the court decision. University of Colorado law professor Ann Lipton said a decision against the government would call into question other equity investments under the Chips Act. The Commerce Department has used Chips Act funding to invest in IBM and GlobalFoundries.
Historical precedent includes the Treasury taking a roughly 60% stake in General Motors during the 2009 financial crisis, which was sold by 2013. Both Bush and Obama administrations were criticized by Republicans for that bailout.
Market Strategists Weigh In
Aniket Shah, global head at Jefferies, said stock gains reflect the view that the government is both a customer and a spokesperson. Gina Martin Adams, chief market strategist at HB Wealth Management, warned of the risks of government backing. In a text message, Adams said, "The risks of government 'backing' have always been there..."
The convergence of political, legal, and market risks suggests that while the stock market has performed well under Trump, the sustainability of those gains—particularly for government-backed companies—remains uncertain.