By Graham Summers, MBA | Chief Market Strategist
By now you’ve no doubt heard that the Department of Government Efficiency (DOGE) is uncovering a truly jaw-dropping amount of fraud, waste, and abuse in the U.S. Federal Government.
Some of the more egregious items:
- The government effectively funds the media via backdoor grants and subscriptions. We’re not talking about small amounts either, we’re talking about $8 million for Politico, $1.6 million for the New York Times, and millions for the Associated Press.
- The United States Agency for International Aid (USAID) has been spending $50 billion per year financing countless causes that are of questionable value, e.g. gender-based plays in Peru, DEI scholarships in Burma, sex changes in Guatemala, tourism in Egypt, etc.
To be clear, all of this is wasteful spending that needs to go. But the big questions are:
- Will this really put a dent in the U.S. deficit?
- What are the implications for investors?
Regarding #1, the fraud, waste, and abuse DOGE has uncovered thus far, while infuriating, is nowhere near the $1.8 trillion deficit run by the U.S. each year. Of course, it’s still very early in this process (the Trump administration is only in its 3rd week), but the fact remains, DOGE has a LOT of work to do to put a major dent in the U.S.’s $1.8 trillion deficit.
By way of context, USAID, which DOGE has just shut down, had an annual budget of $50 billion. That sounds like a lot of money, but it comes to just ~2% of the U.S.’s deficit. So again, DOGE needs to cut a LOT more spending to really put a dent in the U.S.’s finances.
Which brings us to #2: what are the implications for investors?
Historically, betting against Elon Musk has been a bad bet. The man has single-handedly changed auto manufacturing as well as space exploration. And he has stated that he intends to cut $1 trillion in spending before he’s done.
Now THAT would be significant. And while the media and Wall Street are in disbelief that Musk can do this, the bond market is flashing a signal that Musk could very well succeed.
To wit, bond yields peaked in early 2025 just before DOGE and Musk began their work. This is a major signal that bonds were beginning to wake up to DOGE’s potential: reducing the U.S. deficit would be VERY bullish for Treasuries.
Bonds are not the only asset class being impacted by this. Please note that stocks stopped correcting THE day that Treasury yields peaked. They then launched a “rip your face off” rally with the S&P 500 rising 300 points in a little over a week.
Bottomline: the potential impact of DOGE on the stock market is NOT being correctly discounted by the majority of investors. This kind of mispricing can open the door to incredible gains with the right investments.
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Best Regards
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research
