At The Money: Deregulation Will Free Your Portfolio

Episode Summary

Executive Summary: The transcript examines the Free Markets ETF (FMKT), an active fund built to profit from deregulation under the Trump administration. Portfolio manager Michael Guyed argues deregulation boosts margins, speeds time to market, and creates sector-specific winners, especially in financials, defense, energy, crypto, and select industrials. The discussion emphasizes using AI, transcripts, and policy monitoring to identify beneficiaries and stresses that the theme can persist beyond Trump through shifting policy priorities.

Main Topics: FMKT’s origin as a deregulation theme (Priority: 5/5): The ETF was launched after an advisor suggested investing in companies likely to benefit from Trump-era deregulation, turning a policy idea into an investable active strategy. How deregulation translates into profits (Priority: 5/5): Guyed argues regulation is a form of friction that slows time to market, compresses margins, and hurts earnings, making deregulation a direct business tailwind. Sector and stock selection process (Priority: 5/5): The fund uses AI screening, earnings-transcript analysis, valuation filters, and regulatory-cost signals to identify sectors and individual companies most exposed to deregulation benefits. Core portfolio exposures (Priority: 4/5): The ETF emphasizes financials, cannabis, nuclear/energy, aerospace/defense, and select names such as Robinhood, Oracle, Palantir, and Archer, while being less focused on traditional tech. Political neutrality vs policy-driven investing (Priority: 4/5): The manager insists the fund is not a partisan bet but a policy-driven strategy: different administrations may favor different sectors, and holdings should shift accordingly. Benchmarking and performance (Priority: 4/5): Guyed says the S&P 500 is an imperfect benchmark because it is increasingly concentrated in AI and large-cap growth; FMKT should be judged on thematic fit and risk-return objectives. Lagged market impact and active management (Priority: 4/5): Deregulation takes time to show up in earnings, so the strategy requires active rebalancing to avoid drawdowns and capture delayed benefits as policy changes filter through.

Key Arguments: Deregulation can improve earnings by lowering friction, accelerating approvals, and reducing compliance costs. The best opportunities are in sectors with the most regulatory burden, such as financials, cannabis, nuclear power, defense, and energy. AI is useful not as an investment theme here, but as a tool to detect which firms and sectors are most exposed to regulatory shifts. The fund is active because executive orders and policy changes create moving targets; static indexing would miss the changing opportunity set. The strategy is not inherently Republican or Democratic; different administrations can deregulate different sectors, so the portfolio should evolve with policy. The S&P 500 is not a clean benchmark for FMKT because it is itself concentrated in AI-related large-cap growth names. Some holdings are selected for direct deregulation exposure, while others are chosen because momentum and policy tailwinds reinforce the thematic case. Government-contract businesses, especially those tied to defense or FedRAMP-related approvals, can benefit from faster, less burdensome approval processes. Deregulation effects are often delayed, so current market pricing may underappreciate the eventual earnings impact.

Data Points: ETF launch timing: Exactly one year ago - FMKT launched about a year before the interview. Minimum thematic allocation: 80% of assets - Fund mandate requires at least 80% of assets in companies expected to benefit from regulatory shifts. Crypto sleeve: Up to 5% - Prospectus allows up to 5% of the portfolio in Bitcoin and Ethereum. Network size used for idea generation: 350 advisors - Guyed says he regularly talks to about 350 advisors. Day-one trading volume: 4,000 traded shares - FMKT traded 4,000 shares on its first day. Relative outperformance peak: 1,000 basis points over the S&P - Guyed says the fund was about 1,000 bps ahead of the S&P at one point. AI-related reference to S&P 500: Large-cap growth is described as AI-heavy - Used to argue the S&P is no longer a clean diversified benchmark. Portfolio review cadence: Once a week - The portfolio managers meet weekly to adjust holdings based on policy and market conditions.

Pivotal Quotes: "Politics goes into policy, policy goes into profits." — Michael Guyed: Explains why the fund is framed as policy-driven rather than partisan. "Deregulation arguably makes the time to market faster. It increases margins." — Michael Guyed: Core thesis for why deregulation should benefit corporate fundamentals. "The market, I think, is still largely undervaluing the impact of deregulation." — Michael Guyed: Summarizes the investment case that the theme has not yet been fully priced in.

Implications: Listeners are left with a case for treating deregulation as a durable, active investment theme that may outperform as policy changes work through earnings. The fund suggests future winners will vary by administration, requiring continuous rotation and close monitoring of regulatory shifts.