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In an unexpected turn of events, former President Donald Trump has won the presidential election once again, securing 312 electoral votes to Democratic Party nominee Kamala Harris's 226. This victory makes Trump only the second President in U.S. history, after Grover Cleveland, to serve nonconsecutive terms. As Wall Street reacts to this political development, the focus shifts to the challenging economic landscape Trump will inherit as he assumes office.

During Trump’s initial term from January 20, 2017, to January 20, 2021, his administration saw significant returns in major stock indexes. The Dow Jones Industrial Average (DJINDICES: ^DJI) gained 57%, the S&P 500 (SNPINDEX: ^GSPC) increased by 70%, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) surged 142%. However, Trump’s impending term is overshadowed by a historically expensive stock market.

According to the Shiller P/E Ratio, also known as the cyclically adjusted P/E ratio or CAPE, which averages inflation-adjusted earnings from the past decade, the market exhibits its third-highest valuation in over 150 years. On November 25, the Shiller P/E Ratio for the S&P 500 reached 38.20, more than double its long-term average of 17.17, a level seen only before the dot-com bubble burst and during late 2021/early 2022.

Additionally, Warren Buffett's preferred valuation metric, the "Buffett Indicator," which compares the market cap of publicly traded companies to GDP, has hit unprecedented levels. As of November, the indicator almost reached 206%, well above its historical average of 85%. Such high valuations have traditionally foreshadowed significant market corrections, putting Trump's second term under a cloud of financial uncertainty.

Despite these daunting statistical signals, historical data provides a glimmer of hope. Economic cycles typically show that periods of growth last notably longer than recessions. Since World War II, the U.S. has experienced 12 recessions, most resolving within a year, while economic expansions have often spanned multiple years.

This trend extends to the stock market as well, where bull markets have outlasted bear markets by an average of 3.5 times since the Great Depression. Considering these historical patterns, investors may still find reason to remain optimistic about the long-term market outlook, even as short-term corrections seem imminent.