Will There Be a Stock Market Crash Under President Donald Trump? One Forecasting Tool With 155 Years of History in Its Sails Offers an Answer.

The S&P 500 Shiller CAPE ratio is at 40.44, the second-priciest level in history and well above the 30 threshold that has historically preceded declines of 20% to 89% across prior occurrences. The article argues Trump-era policy support, including the TCJA and record S&P 500 buybacks likely topping $1 trillion in 2025, has helped fuel strong equity returns, but valuation risk now dominates the outlook. It frames the setup as bullish on fundamentals yet increasingly vulnerable to a broad market drawdown.

Analysis

The market is not being priced for a normal policy cycle; it is being priced for a sustained liquidity-and-fiscal-support regime. The combination of lower statutory corporate taxes, elevated buyback authorization, and a strong earnings surprise cadence creates a reflexive bid for mega-cap winners, but that same mechanism also front-loads future returns and raises the odds of a sharp multiple reset once earnings growth normalizes. In other words, the market’s current strength is less about broad fundamental breadth and more about mechanical capital return plus concentrated index leadership.

The more important second-order effect is that buybacks are increasingly acting as a volatility suppressor in the short run and a fragility amplifier over a 6-18 month horizon. When repurchases are at record levels, declines get bought faster, which delays mean reversion and keeps trend-following flows embedded in the market; but that also leaves valuations more dependent on continued authorizations and free cash flow durability. If financing conditions tighten or earnings revisions roll over, the absence of organic breadth will matter because the marginal bid has been artificially boosted by corporate demand rather than end-investor conviction.

The valuation signal matters most as a regime-change indicator, not a timing tool. Elevated CAPE readings historically do not stop rallies immediately, but they do compress forward return expectations and increase crash convexity: small shocks in policy, rates, or earnings can trigger disproportionately large drawdowns once the market is crowded in the same duration-sensitive names. The practical takeaway is that the trade is not to fight the tape outright; it is to own quality with explicit downside protection and fade the most valuation-sensitive parts of the index on strength.

Among the cited beneficiaries, NVDA retains the cleanest fundamental support because AI capex still has operating momentum, while INTC is more of a policy beta and capital-allocation beta than a secular winner. NFLX is the least directly tied to the tax/buyback impulse and should be treated as a relative defensiveness name rather than a macro beneficiary. The broader opportunity is in exploiting dispersion: long cash-generative monopolies, short low-visibility, high-multiple index exposure.

Key Decisions for Investors

• Buy NVDA vs. broad-market hedges on a 1-3 month horizon; pair with an S&P 500 put spread to capture continued AI leadership while limiting exposure to a valuation reset.
• Short INTC as a 3-6 month relative-value expression versus NVDA or SMH; the stock is more exposed to subsidy/policy hope than near-term earnings power, giving unfavorable downside/upside symmetry.
• Use SPY or QQQ put spreads dated 3-6 months to hedge long-only books; implied vol should remain cheaper than the convexity risk of a CAPE-driven air pocket, especially after any short-term rally extension.
• Add NFLX as a lower-beta compounder only on pullbacks, but size it as a quality-defensive long rather than a macro winner; risk/reward is better in a drawdown than after momentum extensions.
• Reduce net exposure to index megacap beta on strength and rotate toward equal-weight or cash-flow screen baskets; the trade is to monetize crowded leadership before breadth deterioration becomes visible in earnings revisions.