The Trump Bull Market Is Near Its Tipping Point, According to More Than 150 Years of History

From a purely statistical standpoint, Wall Street has loved having Donald Trump in the White House. During his first, non-consecutive term, the ageless Dow Jones Industrial Average (^DJI +0.14%), benchmark S&P 500 (^GSPC +1.08%), and tech-inspired Nasdaq Composite (^IXIC +1.91%) rallied by 57%, 70%, and 142%, respectively.

While it’s normal for the major stock indexes to rise under a sitting president, annualized gains observed under Trump are higher than most other presidents since the late 1890s.

This outperformance has continued into the president’s second term. Since Trump’s inauguration on Jan. 20, 2025, the Dow, S&P 500, and Nasdaq Composite have risen by 18%, 24%, and 32%, respectively. These gains have been powered by the evolution of artificial intelligence (AI), record S&P 500 share buybacks in 2025, and better-than-expected corporate earnings.

President Trump in an Oval Office meeting. Image source: Official White House Photo by Daniel Torok.

But no bull market is indefinite. More than 150 years of historical data strongly suggest the Trump bull market is near its tipping point — and substantial downside may await.

Wall Street is on the verge of doing something not witnessed in 155 years

Though several catalysts can upend the Trump bull market, arguably none is more pressing than stock market valuations.

“Value” is something of a tricky subject, given that there’s no one-size-fits-all way to evaluate and value public companies or the broader market. What one investor views as expensive might be considered a bargain by another. The emotional and subjective nature of valuations is one of the factors that makes predicting short-term directional movements in the broader market so challenging.

However, one time-tested valuation tool has a knack for side-stepping subjectivity: the S&P 500’s Shiller Price-to-Earnings (P/E) Ratio, also known as the Cyclically Adjusted P/E Ratio (CAPE Ratio).

What separates the Shiller P/E from the traditional P/E ratio is time. Whereas the latter only accounts for 12 months of trailing earnings per share (EPS) and can therefore lose its usefulness during recessions if EPS turns negative, the Shiller P/E is based on average inflation-adjusted EPS over the previous 10 years. Even during recessions, the Shiller P/E remains useful.

Shiller PE Ratio is now just 3.5% away from passing the Dot Com Bubble as the most expensive stock market valuation in history 🚨🚨🚨 pic.twitter.com/1ceOa3yhfs

— Barchart (@Barchart) June 1, 2026

When back-tested to January 1871, the S&P 500’s CAPE Ratio has averaged almost 17.4. But earlier this month, the CAPE Ratio reached 42.84, representing the priciest valuation of the Trump bull market, and the second-priciest multiple in history, behind the dot-com bubble (a peak of 44.19 in December 1999).

Although the S&P 500’s Shiller P/E Ratio has its limitations — e.g., it can’t predict when a stock market correction will begin — it has a historically flawless track record of foreshadowing significant downside in Wall Street’s major stock indexes when it surpasses 30.

The Shiller P/E has only exceeded 30 on six occasions over the last 155 years. Excluding the present, the previous five instances all resulted in the Dow Jones Industrial Average, S&P 500, and/or Nasdaq Composite losing 20% to 89% of their value. Following the dot-com peak, the S&P 500 and Nasdaq shed 49% and 78% of their respective value.

More than 150 years of valuation history suggest it’s only a matter of time until the Trump bull market rolls over.

Image source: Getty Images.

There’s more: Game-changing innovations have a checkered past

But the Shiller P/E Ratio isn’t the only glaring warning that Wall Street’s bull market under President Trump is on thin ice. The checkered past of game-changing innovations should also give investors pause.

Nothing has fueled retail investor excitement quite like the evolution of AI. Empowering software and systems with the tools to make autonomous, split-second decisions is a technology that PwC analysts believe can add $15.7 trillion to global gross domestic product by 2030.

All it takes is a glance at the operating results of Wall Street’s leading AI stocks to recognize that AI infrastructure demand is very real and off the charts. Businesses simply can’t get enough of Nvidia‘s graphics processing units, which act as the brains of AI-accelerated data centers, or the memory/storage solutions that facilitate autonomous decision-making and the training of large language models.

But we’ve witnessed similar patterns before with next-big-thing technologies, and it hasn’t ended well for retail investors.

Stock market bubbles throughout history…

AI stocks now ~40% of the market. pic.twitter.com/RxSAh09k6F

— Geiger Capital (@Geiger_Capital) May 8, 2026

Dating back to the advent and proliferation of the internet more than 30 years ago, every game-changing innovation has navigated an early stage bubble-bursting event. The reason these bubbles form is that professional and retail investors consistently overestimate the adoption or optimization rate of innovations.

For instance, the metaverse was the hottest thing since sliced bread five years ago. Professional and retail investors alike were touting sky-high addressable markets tied to 3D virtual worlds where we could all interact. However, the real-world adoption of metaverse solutions has been minimal, at best.

Artificial intelligence has followed a development path that’s similar to the internet in the mid-1990s. Businesses haven’t been afraid to spend aggressively to expand their AI data center infrastructure, much in the same way that businesses welcomed the internet with open arms. In other words, AI adoption hasn’t been an issue.

However, the internet fell short from an optimization standpoint. Although businesses quickly adopted internet-driven strategies, it took more than half a decade for companies to optimize sales and profits. It’ll likely be a similar story for AI. Even though businesses are deploying AI solutions, they’re nowhere near a state where they can be described as mature or optimized.

The puzzle pieces for an AI-driven bubble-bursting event are firmly in place. When coupled with a historically pricey stock market, the conclusion is that the Trump bull market’s time is nearly up.