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London, United Kingdom, Nov 07, 2025, As 2025 comes to a close, investors, policymakers, and analysts alike are assessing the impact of Donald Trump’s first year back in the White House. For markets, the return of Trump has meant a sharp shift in tone, one defined by tax incentives, deregulation, and a renewed focus on domestic energy. According to Julian Baker, Senior Political and Economic Strategist at St Mary Capital, the administration’s first year has been marked by both confidence and controversy, with markets reacting to each new policy headline in real time.
Baker describes Trump’s year as one of strong intentions but uneven execution. While the president’s policies have undeniably supported short term growth and investor optimism, the longer term implications remain unclear. “Trump brought back the same mix of energy and unpredictability that defined his first term,” Baker says. “The economy has benefited from decisive action, but the cost of that decisiveness is greater uncertainty in global relations.”
Economic Growth and Tax Policy
The administration’s economic focus has centered on business incentives and tax relief. The revised corporate tax framework, passed midyear, reduced rates for manufacturers and small businesses, encouraging a wave of capital spending. Early data suggests a measurable pickup in domestic investment, particularly in infrastructure, defense, and technology.
Markets have welcomed these changes. The S&P 500 rose more than 14 percent during the year, aided by renewed confidence among corporate leaders and stronger earnings guidance. Yet, Baker notes that the gains have come alongside growing fiscal pressures. The deficit widened as federal spending increased, largely due to new energy subsidies and infrastructure initiatives.
Research points out that this fiscal expansion has helped maintain growth near 2.5 percent despite higher interest rates, though it leaves little room for policy error heading into 2026. Investors now face the dual challenge of pricing in strong near term performance while preparing for potential inflationary aftershocks.
Foreign policy has once again played a defining role in Trump’s economic legacy. Renewed trade negotiations with China, a revised tariff framework for European imports, and the reintroduction of energy export incentives have all influenced market sentiment.
Baker’s team has tracked volatility spikes coinciding with each major policy announcement. While global investors initially feared a return to full scale trade conflict, markets have largely adapted to the new environment. Manufacturing data in the U.S. shows modest improvement, while certain export dependent sectors remain cautious.
In contrast, America’s energy policy has been a clear winner. Expanded drilling rights and reduced environmental restrictions have fueled a revival in domestic oil and natural gas production. The move has kept energy prices relatively stable while boosting employment in key regions.
Inflation, Rates, and Market Psychology
Inflation remains a point of contention. Despite fiscal expansion, price growth has moderated due to productivity gains in technology and a strong dollar. The Federal Reserve’s careful stance has helped anchor expectations, allowing equities to perform well even as bond yields rose modestly.
Baker observes that investors have grown more comfortable with Trump’s policy style, quick, assertive, and aimed squarely at economic growth. However, confidence remains fragile. Political friction in Congress and concerns about international alliances could still shape sentiment in unpredictable ways.
As Trump’s second year begins, St Mary Capital expects policy focus to shift toward infrastructure completion, reshoring of critical industries, and tighter trade oversight. Whether these priorities sustain economic momentum will depend on execution and political cooperation.
Baker’s overall view is pragmatic. Markets thrive on clarity, and while Trump’s approach delivers action, it also delivers surprise. For investors, the strategy is to remain flexible and to benefit from pro growth policy while managing the volatility that often accompanies it.
In the end, Trump’s first year has reenergized parts of the American economy and unsettled others. For markets, it has been a reminder that political leadership remains one of the most powerful forces shaping investment outcomes
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