Trump-Era Policy Frameworks and Investor Sentiment: Reshaping Public-Sector Equities in U.S. Infrastructure and Government Contracts

A bar chart comparing S&P 500 sector returns under Trump (2017–2021) and Biden (2021–2025), highlighting defense, energy, and infrastructure sectors. The chart shows defense and industrials outperforming under Trump, while energy lags despite deregulation.

Data query for generating a chart:- X-axis: S&P 500 sectors (Defense, Energy, Infrastructure, Technology, Financials).- Y-axis: Cumulative returns (2017–2021).- Data points: Defense (38.74%), Energy (-9%), Infrastructure (63.0%), Technology (114%), Financials (43%).- Source: a Visual Capitalist chart.

The Trump administration's approach to infrastructure and government efficiency from 2017 to 2021 created a complex landscape for public-sector equities, marked by deregulation, tax cuts, and strategic policy shifts. While these measures aimed to stimulate economic growth and reduce bureaucratic hurdles, their impact on investor sentiment was nuanced, with sector-specific outcomes and lingering uncertainties.

Deregulation and Tax Cuts: A Double-Edged Sword

The Tax Cuts and Jobs Act of 2017, which reduced the corporate tax rate from 35% to 21%, initially boosted corporate earnings and stock valuations. Financial institutions and industrials saw immediate gains, with the S&P 500 Financials index rising 43% over the period, as shown in the chart. However, the energy sector, despite benefiting from deregulation and a pro-fossil-fuel agenda, underperformed, posting a -9% return. This discrepancy highlights the interplay between policy and market forces: while Trump's rollback of environmental regulations lowered compliance costs, global energy transitions and market volatility-exacerbated by the 2020 oil price crash-diminished investor confidence (see the chart for sector comparisons).

Defense Contractors: A Policy-Driven Success Story

Defense stocks, however, thrived under Trump's "America First" agenda. Companies like Lockheed Martin (LMT) and Northrop Grumman (NOC) saw robust performance, with the Aerospace & Defense industry outperforming the S&P 500 by a significant margin. Over five years, the sector delivered a 199.24% return compared to the S&P 500's 97.12%, as illustrated in the chart. This success was driven by increased defense budgets and international demand for U.S. military equipment, particularly as European allies sought American tactical systems amid global tensions. Analysts anticipate this trend to continue, with Trump's second-term policies likely to prioritize national security and defense modernization, according to a Crowell analysis.

Infrastructure: Uncertainty and Mixed Signals

Trump's infrastructure proposals, including a $200 billion federal plan to leverage $1.5 trillion in private investment, faced political gridlock but introduced regulatory reforms. Executive Order 13807 streamlined environmental reviews for major projects, aiming to reduce delays. However, the absence of a comprehensive infrastructure bill left investors wary. The Infrastructure Investment and Jobs Act (IIJA), passed under Biden, allocated $87.2 billion in competitive grants, but Trump-era pauses on IIJA funding created uncertainty for contractors. For instance, companies like Nucor, which benefited from steel tariffs and reshoring initiatives, faced mixed signals as policy priorities shifted, as reported in a Yahoo Finance article.

Investor Sentiment: Volatility and Strategic Adjustments

Trump's communication style, particularly his use of Twitter to announce trade policies and tariffs, introduced market volatility. Tariff announcements during the U.S.-China trade war, for example, spiked the VIX (volatility index) and caused short-term declines in equity prices, as detailed in a Simplify Partners analysis. While deregulation and tax cuts were generally favorable for sectors like finance and industrials, the unpredictability of trade policies forced investors to adopt hedging strategies. Infrastructure investors, in particular, had to navigate risks tied to regulatory fragmentation and potential stranded assets in renewable energy projects, a dynamic later noted by Crowell.

Conclusion: Navigating a Policy-Driven Landscape

The Trump-era framework reshaped investor sentiment toward public-sector equities by emphasizing deregulation, tax incentives, and defense spending. While defense and industrials emerged as clear beneficiaries, energy and infrastructure sectors faced mixed outcomes due to market dynamics and policy inconsistencies. For investors, the key takeaway lies in aligning portfolios with policy priorities while mitigating risks from regulatory shifts. As the U.S. continues to grapple with infrastructure modernization and energy transitions, the interplay between government efficiency and market forces will remain a critical determinant of public-sector equity performance.