5. Trump’s 3 D’s: DOGE, Deregulation, and Drugs

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5. Trump’s 3 D’s: DOGE, Deregulation, and Drugs

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5. Trump’s 3 D’s: DOGE, Deregulation, and Drugs

What we said
We expected President Trump’s reform agenda to remain a key market driver in 2026, with three initiatives standing out:

  • DOGE (Department of Government Efficiency)
  • Deregulation
  • Drug pricing reform

How it has played out

DOGE: fading impact
The Department of Government Efficiency (DOGE) was created to cut wasteful government spending, with Elon Musk leading the initiative until his departure in May 2025. Since then, DOGE has largely dropped out of the headlines.

When we wrote our Outlook 2026, total estimated savings from DOGE stood at USD 214bn. As of mid‑2026, that figure is USD 215bn,3 implying almost no incremental progress.

Deregulation: significant and structural
While DOGE has stalled, Trump’s broader reform agenda has accelerated. In February 2026, the US government enacted the single largest deregulation measure in history: the Environmental Protection Agency rescinded the 2009 Greenhouse Gas Endangerment Finding, an action estimated to save Americans over USD 1.3tn.4

The most consequential changes, however, relate to bank capital rules. A revision to the Supplementary Leverage Ratio that took effect in January 2026 is estimated to free up USD 219bn, or 14.3%, of banks’ capital, with a further three measures expected later this year that could release an additional 4.8%.5 In total, capital requirements could fall by around 19.1%.

A key beneficiary is the real estate sector: banks can now deduct mortgages and mortgage‑servicing assets from their capital, making these exposures more attractive and potentially providing a meaningful boost to US mortgage lending.

Drug pricing: FDA innovation more important than TrumpRx
The TrumpRx plan, launched in February 2026 to allow consumers to buy drugs directly from pharmaceutical companies, has had limited impact. Many prescription drugs are not available through the scheme, and those that are can often be purchased more cheaply elsewhere.6

By contrast, the more important development has been at the US Food and Drug Administration (FDA). The FDA has shifted towards a more open, research‑ and data‑driven approach, coupled with an accelerated approval programme that lowers bureaucratic barriers and strengthens the pipeline of new drugs.

Trump has argued that high drug prices are needed to incentivise research and development (R&D). The FDA is attacking the cost side instead. It has met its one‑year goal of eliminating unnecessary animal testing, using AI‑powered models in drug development. Over 90% of drugs that passed animal studies previously failed to receive FDA approval,7 highlighting the inefficiency of the old system. Reducing R&D costs via AI could be transformational for the healthcare sector.

Outlook for H2 2026
Trump’s “Three Ds” will continue to matter for markets in H2 2026, but their relative importance has shifted. DOGE has largely run out of steam, with only marginal additional savings since mid‑2025, so we do not expect further meaningful macro impact from government‑efficiency measures.

By contrast, deregulation is a powerful and ongoing driver. The rollback of environmental rules and the substantial easing of bank capital requirements are structural changes that will keep supporting credit creation and risk appetite, particularly in real estate and other rate‑sensitive sectors, even if the macro backdrop becomes more volatile.

In healthcare, we see the FDA’s pro‑innovation stance as more consequential than the TrumpRx pricing initiative. The combination of AI‑enabled drug discovery, lower R&D costs and a faster approval pipeline should gradually improve the sector’s growth and profitability profile, even if headline drug‑pricing reform remains politically contentious. Overall, the “Three Ds” are set to remain a net positive for US risk assets in H2 2026, with deregulation and FDA‑driven innovation outweighing the fading impact of DOGE and the limited reach of TrumpRx.

Action for investors:

  • Treat DOGE as largely priced in. We do not expect further meaningful macro impact from DOGE and would avoid positioning portfolios around additional “efficiency dividend” upside.
  • Lean into deregulation beneficiaries, especially in credit‑sensitive sectors. The rollback of environmental rules and lower bank capital requirements are structural and should continue to support credit creation, risk appetite and real estate‑related activity. Focus on high‑quality US financials and select real estate names with solid balance sheets and prudent underwriting standards.
  • Be selective in US real estate. Easier capital rules are a tailwind for mortgage lending, but higher‑for‑longer rates and weak consumer confidence still weigh on the sector. We would be cautious on homebuilders until there is clearer improvement in rates and demand, while seeing relatively better risk‑reward in income‑oriented REITs that can benefit earlier from easier financial conditions.
  • Increase strategic exposure to innovative healthcare. Focus on companies best placed to benefit from:
    - an accelerated FDA approval process, and
    - lower R&D costs – particularly mid‑cap biotech with late‑stage pipelines.
  • Re‑engage selectively with GLP‑1 / weight loss leaders. As legal overhangs ease, visibility is improving for leading franchises. We see scope for a gradual re‑rating where earnings power is underappreciated and balance sheets are strong.
  • Favour active over passive in policy‑sensitive areas. The uneven impact of deregulation and FDA reform will create winners and losers within financials, real estate and healthcare.

5. Trump’s 3 D’s: DOGE, Deregulation, and Drugs

We do not expect President Trump’s reform agenda to slow down in his second year. We see ‘three Ds’ at the top of President Trump’s programme: DOGE, deregulation, and drug pricing. It is anticipated that other countries will follow closely and may look to adopt similar approaches in their respective countries in due course.

DOGE
Trump had set up the Department of Government Efficiency (DOGE) to reduce wasteful government spending, with Elon Musk initially targeting USD2tn in savings. This was later scaled back to USD1tn and then USD150bn by the end of April. Although Musk departed in late May, taking some of the noise away from DOGE, its work continues. The estimated savings generated by the DOGE up until mid-October 2025 are put at USD214bn7. That represents a combination of asset sales, contract and lease cancellations and renegotiations, deletion of fraudulent and improper payments and workforce reductions. Broad deregulation remains an important theme of the Trump administration and is seen as central to achieving the objective of 3% real economic growth.

Deregulation
One important aspect of the Trump administration’s policies is deregulation (Figure 6). With a particular focus on housing and de-zoning/re-zoning land. De-zoning focuses on removing planning restrictions altogether and re-zoning focuses on changing zoning regulations. Zoning restrictions can often be a drag on the availability of housing and commercial space.

Deregulation in this area could involve a loosening of residential density limits, allowing more apartments/homes to be built, easing shortages and lowering housing costs. For businesses, an easing of zoning regulations can allow, for example, more rapid development of new businesses in key areas. One study finds that if all metropolitan areas adopted the lowest level of land use regulation (found in Texas), US GDP would increase by around 3% or around USD1tn per year.8

Another important piece of financial market legislation is the Genius Act (Guiding and Establishing National Innovation for US Stablecoins Act), which came into US law in July 2025. This allows the establishment of stablecoins typically backed by US Treasuries. This will lead to a significant increase in the number of transactions and hence reduction in costs for cross-border transfers and improved safety and regulation for consumers. It is expected that stablecoins will be able to disrupt the cross-border payment systems, especially in the US, where consumers pay a lot for transfers and often with large time delays. We see that with further enhancement this technology could lead to increased tokenisation of stocks, illiquid assets and eventually 24/7 trading of investment assets.

Drug pricing
Drug pricing has, for a long time, been a contentious issue not just in the US but globally. US drug prices are generally higher than those in the rest of the world, especially for relatively new, branded drugs. President Trump’s view is that drug prices are too low in other markets around the world, especially in European markets, with tariffs (on Switzerland in particular) designed to offset that difference. The Trump administration believes that US drug prices need to remain high in order to incentivise greater investment in research and development. There is general support for that argument in other economies, notably the UK. However, there is a reluctance to see prices rise for the purchasers of drugs, whether they be the end consumer, healthcare providers or the state. In the US, the TrumpRX plan is designed to allow consumers to buy drugs directly from pharmaceutical companies, but it remains to be seen how effective this will be.

Furthermore, patent expirations (generic drug prices are lower in the US than branded drug prices) and the weak pipeline of new drug approvals puts pressure on drug company margins and may further stifle investment in new drugs. Issues relating to drug efficacy (of immunisations and generic widely used drugs such as paracetamol) means navigating developments in the healthcare industry will be no easy task in 2026. We favour exposure to smaller, innovative companies that are in a position to lead new drug development rather than larger, established healthcare companies.

Action for investors:

  • Look for opportunities in the 3D's: private sector provision of formerly government services; real estate development in selected residential and commercial areas as a result of de-zoning/re-zoning; and innovators in the healthcare industry.
  • The Genius Act may be a threat to existing cross border payment companies and banks but will be an opportunity for companies in the stablecoin arena.
  • Be wary of changes in the drug pricing landscape and the impact on investment and innovation.
  • Other economies (such as the UK and some emerging economies) may look to copy DOGE-like initiatives, so look for opportunities there.

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