One year after President Donald Trumps re-election, the U.S. stock market continues to notch fresh record highs.

The SP 500 has gained 19.6% over the past 12 months, supported by strong corporate earnings and investors enthusiasm for artificial intelligence. Equities have shown remarkable resilience, defying concerns over renewed trade tensions and bouts of volatility.

For Trump, the markets performance is proof that his policies are working. On October 28, during his visit with Japanese Prime Minister Sanae Takaichi, Trump said: Their market today and our market today both hit record highs. That means were doing something right.

However, many analysts argue that robust corporate profits combined with the massive AI-driven rally are the true forces behind these gains.

Keith Lerner, chief market strategist at Truist, explained: What happens in Washington matters, but it isnt everything. Despite all the shifting narratives, the core story this year remains the dominance of technology and AI, and the continued strength of U.S. companies.

Reaching Record Highs

Jed Ellerbrock, portfolio manager at Argent Capital Management, said the markets resilience has been surprising given Trumps radical changes to trade policy and his persistent pressure on the Federal Reserve to cut interest rates.

Trump has introduced a lot of uncertainty into the markets, and markets hate uncertainty, he said.

Still, investors shifted their focus to the AI boom and largely ignored tariff-related concerns. The AI investment cycle is massive and unprecedented it overshadows everything else, Ellerbrock added.

The SP 500, weighted by market capitalization, has become increasingly concentrated in big tech names. Nvidias market value has reached $5 trillion, representing 8% of the indexs total capitalization.

By contrast, the equal-weight version of the SP 500 which gives every stock the same weight has risen only 6% over the past year, compared to 19.6% for the main index.

Weathering the Tariff Turbulence

The SP 500 plunged 19% in April when Trump announced his plan to impose new tariffs.

However, as markets fell, the administration softened its harshest proposals, allowing stocks to rebound.

Equities may have rallied because the final tariff measures were less severe than feared, said Mark Malek, chief investment officer at Siebert Financial.

If not for the earlier tariff-induced selloff, markets might be even higher today.

According to CFRA Research, the SP 500s performance from Trumps re-election through the end of October ranks as the eighth-best first-year showing for a U.S. president since World War II.

By comparison, the index surged about 38% during Joe Bidens first year in office the best first-year performance in modern history.

Still, U.S. market gains appear modest next to some global peers: South Koreas KOSPI is up 66% over the past 12 months, Hong Kongs Hang Seng has risen 28%, and Poland and Greece have climbed roughly 52% and 60%, respectively.

Ups and Downs Under Trump

Even as equities trade near record highs, U.S. bonds have also performed strongly.

Despite concerns about the widening U.S. deficit, Trumps sweeping One Big Beautiful Bill Act, and his attacks on the Feds independence, investors have continued to flock to U.S. Treasuries.

The 10-year Treasury yield has fallen from 4.4% in November 2024 to 4.1% this month.

Meanwhile, the CBOE Volatility Index (VIX) has remained subdued for most of the past six months, and bond market volatility is nearing its lowest levels of the year.

Treasury Secretary Scott Bessent told the Financial Times: We want America First policies as much as possible without spooking the market. What gets people into trouble is ignoring the market. You have to respect it.

Carrying the Baton Forward

Following Trumps re-election, investors welcomed the prospect of lighter regulation and tax cuts at a time when the Federal Reserve had recently lowered interest rates, further boosting equities.

Ross Mayfield, investment strategist at Baird, said: The administration has largely delivered on what investors were optimistic about.

Ultimately, this remains an AI-driven bull market. The administration picked up the baton midway through a rally that still has room to run.

Mayfield expects further gains but also anticipates a correction after the current strong leg higher. I dont expect a smooth ride. We could see a 10% to 15% pullback over the next 12 months.

David Solomon, CEO of Goldman Sachs, shares a similar outlook, saying he expects a 10% to 20% decline in stocks over the next two years: Markets rise, then pull back for investors to re-evaluate.

As the SP 500 continues setting new highs, it is increasingly reliant on large tech and AI firms leaving retail investors and pension funds more exposed to the risks of a sudden reversal.

Keith Lerner of Truist concluded: The quiet star of this bull market is corporate earnings.

But with valuations now at historically elevated levels, risks remain. When the market hasnt seen a correction since April, it becomes more vulnerable to any negative surprise whatever its source.