Behind the “Trump Bump”: How Much Could Stocks Rise in 2025?

    Date:

    For the past two days, the stock market has benefitted nicely from the so-called “Trump Bump.” 

    That is, ever since Donald Trump won the 47th U.S. Presidential Election – on the premise that his pro-growth policies will benefit the U.S. economy and stock market – stocks have been taking off. 

    But how big is the “Trump Bump” really? Is it enough to push stocks 2%… 5%… 10% higher? 

    Well, we’ve looked back on the market’s performance during Trump’s first term in office. And in our analysis, we observed two forms of the Trump Bump. 

    1. A boost for corporate earnings through more pro-growth policies and tax cuts.
    2. A rise in valuations thanks to increased investor confidence in the economy. 

    Clearly, those two factors are net-positive for stocks. And we see a pathway for this election-driven rally to push stocks almost 30% higher in 2025. 

    Here’s our math.

    Higher Earnings Mean Stocks Should Keep Rising

    The first form of the “Trump Bump” – higher earnings – is about a 2% to 4% boost in earnings, before considering tax cuts. That is, from November 2016 (when Trump won his first term as president) to December 2017 (the end of his first year in office), we saw 2017 and ‘18 earnings estimates rise about 2% and 4%, respectively. 

    So, it seems Trump’s pro-growth policies were good enough for a considerable rise in earnings estimates during his last term in office. We think that’s achievable this time around, too. 

    Meanwhile, there is talk that Trump will also reduce the corporate tax rate from 21% to 15%. Goldman Sachs estimates that if he is successful at doing so, it could result in a 4% boost to earnings per share (EPS) for the S&P 500

    In other words, the boost to earnings over the next few years will likely be a 2% to 4% bump-up from pro-growth policies and a 4% bump-up 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. 

    Chart

    SignUp For Breaking Alerts

    New Graphic

    We respect your email privacy

    Share post:

    Popular

    More like this
    Related

    How to Start Investing with IBKR

    Starting an investment process can seem daunting. In this...

    Rethinking Asset Growth in Asset Pricing Models

    Your Privacy When you visit any website it may use...

    China’s Turning Point: Inside the Stimulus Plan

    This podcast episode features Andrew Wilkinson and Dr. Xiaolin...

    Chart Advisor: Approaching Nvidia’s Earnings Report

    From SIA Charts 1/ Nvidia Corp. (NVDA) 2/ Matrix 3/ Candlestick Chart Investopedia is...