Will the Stock Market Crash Under President Trump in 2026? Historical Data Offers a Grim Answer for Investors.

Economic Overview - The S&P 500 has advanced 1% year to date and is close to its record high, but potential economic fallout from tariffs and high valuations could lead to a significant market decline in 2026 [1] - President Trump's assertion that tariffs are strengthening the economy is contradicted by data, indicating that the average tax on U.S. imports has increased fivefold [2] Tariff Impact - A study linked by President Trump claims that foreign producers bear the majority of tariff costs, but this is misrepresented; the study indicates that U.S. consumers pay up to 43% of the tariff burden, with U.S. firms absorbing the rest [3][2] - The claim that tariffs have led to extraordinary economic growth is challenged by the fact that GDP growth was below average in the first three quarters of 2025, with AI spending being a significant contributor to economic support [4] Market Valuation - The S&P 500 is trading at a forward P/E ratio of 22.2, which is considered expensive; historically, such valuations have preceded bear markets during the dot-com bubble and the Covid-19 pandemic [5] - Real GDP growth for the first nine months of 2025 was 2.51%, below the 10-year, 30-year, and 50-year averages, indicating potential economic weakness [6] - AI spending contributed 0.97 percentage points to real GDP growth, suggesting that without it, GDP growth would have been only 1.54% [6]