$FMKT: How Deregulation Is Re-Entering the Policy Toolkit
Key Highlights
As inflation pressures ease in 2025, U.S. policymakers are shifting focus from price control toward measures that support economic growth.
Deregulation has re-entered the policy toolkit as a way to reduce business costs and improve economic efficiency without relying solely on monetary or fiscal stimulus.
Recent executive actions point to renewed momentum to scale back regulatory burdens across multiple federal agencies.
Industries with high compliance costs, including energy, financials, healthcare, transportation, and manufacturing, appear most exposed to potential deregulation effects.
For investors, deregulation represents a cross-sector theme rather than a single-industry trade, with outcomes tied closely to policy follow-through and implementation.
The Free Markets ETF (FMKT) is designed to provide exposure to U.S. companies that may benefit from a lighter regulatory environment, aligning portfolio construction with the broader deregulation theme.
As 2025 unfolded, a notable shift took place in the U.S. economic backdrop. After several years dominated by inflation concerns, price pressures finally began to ease. By late in the year, consumer inflation had cooled materially from prior peaks, giving policymakers more breathing room.¹ With inflation no longer the singular focus, attention has increasingly turned toward restoring and sustaining economic growth. That pivot has brought deregulation back into the policy conversation.
For much of the post-pandemic period, policymakers emphasized restrictive tools. Higher interest rates and tighter financial conditions were viewed as necessary to bring inflation under control. As that objective has largely been met, officials have begun exploring complementary approaches that do not rely solely on monetary restraint. Reducing regulatory burdens has re-emerged as one such option, framed as a way to lower costs for businesses and improve economic efficiency without reigniting price pressures.
This shift was underscored in January 2025, when President Donald Trump signed an executive order directing federal agencies to eliminate ten existing regulations for every new rule introduced.² The administration characterized the initiative as an effort to “unleash prosperity” by cutting compliance costs that were seen as weighing on small businesses and households.³ Regardless of political interpretation, the move signaled a clear change in emphasis. Growth, productivity, and private-sector expansion were once again being placed at the center of economic strategy.
Why Deregulation Matters Now
Regulation plays an important role in safeguarding consumers, workers, and the environment. At the same time, regulatory complexity can impose significant costs on businesses. Compliance requires capital, labor, and time that might otherwise be directed toward investment or innovation. When inflation is elevated, policymakers are often reluctant to loosen these constraints for fear of stimulating demand too aggressively. When inflation moderates, that calculus can change.
Economists and policy analysts have long argued that the cumulative cost of federal regulation acts as a hidden tax on the economy. Estimates suggest that the annual economic burden of U.S. regulations runs into the trillions of dollars.⁴ Even modest reductions in regulatory overhead can potentially improve profit margins, encourage capital spending, and support job creation. In that sense, deregulation becomes less about ideology and more about efficiency.
The renewed focus on deregulation also reflects broader global competition. U.S. companies operate in an environment where capital is increasingly mobile and innovation cycles are shortening. Policymakers concerned about long-term growth and competitiveness may view regulatory streamlining as a way to keep domestic firms on equal footing with international peers.
Sectors Most Exposed to Deregulation
Deregulation does not affect all industries equally. Its impact tends to be most pronounced in sectors where compliance costs are high or approval processes are lengthy.
Energy is frequently cited as a primary beneficiary. Faster permitting for pipelines, drilling, and infrastructure projects could reduce development timelines and lower costs for producers. Financial services is another area of focus. Banks and other lenders continue to operate under stringent capital, reporting, and stress-testing requirements introduced after the global financial crisis. Any relaxation of these rules could meaningfully affect profitability and lending capacity.
Healthcare companies also stand to benefit from streamlined approval processes and simplified administrative requirements. Regulatory complexity in areas such as billing, reimbursement, and product approval has long been cited as a constraint on efficiency. Transportation and manufacturing firms often advocate for greater flexibility in labor rules and environmental compliance, arguing that such changes would improve productivity.
Recent analysis has highlighted energy, financials, healthcare, and environmentally regulated industries as areas where deregulation could be most concentrated, with potential market impacts that remain underappreciated.⁵ The common thread across these sectors is that regulatory costs are both material and visible on the income statement.
Translating Policy Into Investment Strategy
For investors, shifts in policy direction raise an important question: how can macro themes such as deregulation be reflected in portfolio construction?
One approach is thematic investing. Rather than targeting a single sector, thematic strategies aim to capture a broader trend that cuts across industries. In this context, deregulation represents a policy tailwind that may benefit a diverse group of companies, each exposed in different ways.
The Free Markets ETF (FMKT), launched in mid-2025, was designed with this premise in mind. The fund seeks exposure to U.S. companies that its managers believe are well positioned to benefit from a lighter regulatory environment.⁶ Its investment universe includes financials, healthcare, energy, transportation, and technology firms, aligning closely with the sectors most often cited in deregulation discussions.⁷
Risks and Trade-Offs
Deregulation can face legal challenges, political opposition, and implementation delays. Rules are often deeply embedded in administrative processes, making them difficult to unwind quickly. The economic benefits may take time to materialize and may not unfold evenly across sectors.
From an investment standpoint, thematic strategies also carry concentration and policy risk. A portfolio tilted toward deregulation beneficiaries may underperform if regulatory momentum slows or if market leadership shifts elsewhere. As with any newer strategy, limited operating history adds another layer of uncertainty.
Deregulation as a Late-Cycle Growth Tool
With inflation pressures receding, deregulation has re-emerged as a potential lever to support growth without reopening inflationary risks. For investors, this environment favors selectivity and an understanding of how policy shifts translate into corporate fundamentals.
Whether deregulation ultimately delivers sustained growth remains an open question. What is clear is that it has returned to the economic conversation at a moment when policymakers are seeking durable ways to extend the expansion.
Consider FMKT. I believe in it. I wouldn’t have launched the fund if I didn’t.
Footnotes
Lucia Mutikani, “U.S. Annual Consumer Inflation Slows in November, but Report Distorted by Missing Data,” Reuters, December 18, 2025.
Donald J. Trump, “Fact Sheet: President Donald J. Trump Launches Massive 10-to-1 Deregulation Initiative,” The White House, January 31, 2025.
The White House, “Fact Sheet: President Donald J. Trump Launches Massive 10-to-1 Deregulation Initiative,” January 31, 2025.
Competitive Enterprise Institute, “Burdensome Federal Regulations Cost Economy $2 Trillion Annually,” U.S. House Committee on the Budget Press Release, April 30, 2025.
Principal Asset Management, “Who Will Benefit from Deregulation?” December 2025.
Free Markets ETF, “About FMKT,” accessed December 2025.
Free Markets ETF, “Investment Strategy Overview,” accessed December 2025.
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Deregulation Strategy Risks.The Fund’s strategy of investing in companies that may benefit from deregulatory measures entails significant risks, including those stemming from the unpredictable nature of regulatory trends. Deregulation is influenced by political, economic, and social factors, which can shift rapidly and in unforeseen directions. Changes in government priorities, political leadership, or public sentiment may result in the reversal of existing deregulatory policies or the introduction of new regulations that could adversely affect certain industries or companies. Further, while the Fund invests in companies expected to benefit from deregulatory initiatives, not all of these companies may achieve the expected advantages, whether fully, partially, or at all. The actual impact of deregulatory measures may vary widely depending on a company’s specific operational, financial, and competitive circumstances. Companies may also face challenges adapting to new regulatory environments, or their competitive positioning may be undermined by other market factors unrelated to deregulation. These risks could negatively affect the performance of the Fund’s portfolio.
Underlying Digital Assets ETP Risks. The Fund’s investment strategy, involving indirect exposure to Bitcoin, Ether, or any other Digital Assets through one or more Underlying ETPs, is subject to the risks associated with these Digital Assets and their markets. These risks include market volatility, regulatory changes, technological uncertainties, and potential financial losses. As with all investments, there is no assurance of profit, and investors should be cognizant of these specific risks associated with digital asset markets.
● Underlying Bitcoin and Ether ETP Risks: Investing in an Underlying ETP that focuses on Bitcoin, Ether, and/or other Digital Assets, either through direct holdings or indirectly via derivatives like futures contracts, carries significant risks. These include high market volatility influenced by technological advancements, regulatory changes, and broader economic factors. For derivatives, liquidity risks and counterparty risks are substantial. Managing futures contracts tied to either asset may affect an Underlying ETP’s performance. Each Underlying ETP, and consequently the Fund, depends on blockchain technologies that present unique technological and cybersecurity risks, along with custodial challenges in securely storing digital assets. The evolving regulatory landscape further complicates compliance and valuation efforts. Additionally, risks related to market concentration, network issues, and operational complexities in managing Digital Assets can lead to losses. For Ether specifically, risks associated with its transition to a proof-of-stake consensus mechanism, including network upgrades and validator centralization, may add additional uncertainties.
●Bitcoin and Ether Investment Risk: The Fund’s indirect investments in Bitcoin and Ether through holdings in one or more Underlying ETPs expose it to the unique risks of these digital assets. Bitcoin’s price is highly volatile, driven by fluctuating network adoption, acceptance levels, and usage trends. Ether faces similar volatility, compounded by its reliance on decentralized applications (dApps) and smart contract usage, which are subject to innovation cycles and adoption rates. Neither asset operates as legal tender or within central authority systems, exposing them to potential government restrictions. Regulatory actions in various jurisdictions could negatively impact their market values. Both Bitcoin and Ether are susceptible to fraud, theft, market manipulation, and security breaches at trading platforms. Large holders of these assets (”whales”) can influence their prices significantly. Forks in the blockchain networks—such as Ethereum’s earlier split into Ether Classic—can affect demand and performance. Both assets’ prices can be influenced by speculative trading, unrelated to fundamental utility or adoption.
● Digital Assets Risk: Digital Assets like Bitcoin and Ether, designed as mediums of exchange or for utility purposes, are an emerging asset class. Operating independently of any central authority or government backing, they face extreme price volatility and regulatory scrutiny. Trading platforms for Digital Assets remain largely unregulated and prone to fraud and operational failures compared to traditional exchanges. Platform shutdowns, whether due to fraud, technical issues, or security breaches, can significantly impact prices and market stability.
● Digital Asset Markets Risk: The Digital Asset market, particularly for Bitcoin and Ether, has experienced considerable volatility, leading to market disruptions and erosion of confidence among participants. Negative publicity surrounding these disruptions could adversely affect the Fund’s reputation and share trading prices. Ongoing market turbulence could significantly impact the Fund’s value.
● Blockchain Technology Risk: Blockchain technology underpins Bitcoin, Ether, and other digital assets, yet it remains a relatively new and largely untested innovation. Competing platforms, changes in adoption rates, and technological advancements in blockchain infrastructure can affect their functionality and relevance. For Ether, the dependence on its proof-of-stake mechanism and smart contract capabilities introduces risks tied to network performance and scalability. Investments in blockchain-dependent companies or vehicles may experience market volatility and lower trading volumes. Furthermore, regulatory changes, cybersecurity incidents, and intellectual property disputes could undermine the adoption and stability of blockchain technologies.
Recent Market Events Risk. U.S. and international markets have experienced and may continue to experience significant periods of volatility in recent years and months due to a number of economic, political and global macro factors including uncertainty regarding inflation and central banks’ interest rate changes, the possibility of a national or global recession, trade tensions and tariffs, political events, war and geopolitical conflict. These developments, as well as other events, could result in further market volatility and negatively affect financial asset prices, the liquidity of certain securities and the normal operations of securities exchanges and other markets, despite government efforts to address market disruptions.
New Fund Risk. The Fund is a recently organized management investment company with no operating history. As a result, prospective investors do not have a track record or history on which to base their investment decisions.
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