Elon Musk's D.O.G.E Could Crash the US Stock Market

Elon Musk's latest project, co-led with Vivek Ramaswamy, is shaking the financial world to its core. Called the Government Efficiency Act (DOGE), this initiative, introduced during President-elect Donald Trump's time, is designed to cut federal spending by targeting $500 billion toward what they call wasteful or misused spending. But while Elon sees cost cutting and deregulation as his ultimate goal, the potential consequences of DOGE have made Wall Street worried. Federal contractors, giant pharmaceutical companies, and even major defense firms like Boeing and Lockheed Martin are bracing for a storm. TD Cowen analysts have raised the red flag. In a note to clients on Friday, Roman Schweizer called DOGE "a significant risk factor" for government contract-related companies. "There may be cuts, and there will be instability in the next few months," he said. For a capital market already concerned about high valuations, DOGE could be just the disruptive bubble that no one wants. DOGE aims to reach $500 billion In an essay in The Wall Street Journal, the duo explained their approach: reducing the bloating of regulations, cutting administrative costs, and saving billions of dollars for taxpayers. They said it would curb federal waste and, in Elon's words, "put the government on a diet". Part of the plan includes discretionary spending cuts, reducing funding for organizations such as the Public Broadcasting Corporation, and restructuring federal workforce policies. For example, Elon wants to reduce staffing by encouraging voluntary resignations and requiring federal employees to work directly. This is Elon's classic strategy: cutting costs, cutting deeper, and then cutting even more. But the problem here is that analysts are skeptical about how much DOGE can actually save. TD Cowen estimates that this initiative could save $50 billion to $100 billion annually. It's certainly a lot of money, but it's nothing compared to the federal deficit, which is expected to reach $1.7 trillion by 2024. In addition, Congress will have to approve any major cuts, meaning DOGE is not only tied up - it's actually handcuffed. Contractors prepare for impact If DOGE achieves its goal, some of the biggest names in the business world may have to bear huge losses. Federal contractors - companies that live and die by government budgets - are particularly vulnerable. According to TD Cowen, defense giants such as Lockheed Martin, Northrop Grumman, General Dynamics, Boeing, and RTX are among the contractors that have suffered the most losses. The Department of Defense alone has a budget of $877 billion and any cuts there could impact these companies, which are the hardest hit in terms of their net income. Not only the defense industry is affected. Leidos Holdings, a company processing contracts in Homeland Security, Justice and Transportation, may also feel the pressure. Pharmaceutical companies like Merck, Pfizer, and Humana are also not safe as they earn billions of dollars through contracts for Health and Life Services. Fear is real - the stocks of some companies have been affected, partly because of high valuations but also because investors are worried about the impending threat of DOGE. TD Cowen analysts also point out that although the potential damage is significant, it may not be as catastrophic as one might think. Congress still holds the power to regulate when it comes to legislation. Of course, no story about Elon can be complete without the madness about cryptocurrency. Since Trump announced DOGE, Dogecoin (the meme currency that Elon famously supports) has surged over 150%. Investors are betting big on Elon's involvement, seeing it as a signal for DOGE price increase. Retail traders are rushing in, fueling a speculative frenzy more akin to a casino than a market. The cryptocurrency market in general tends to react to every move by Elon. And it has been on the rise since Trump won the election.