US financial giant Morgan Stanley says the Department of Government Efficiency (DOGE) headed by Elon Musk is likely extremely bullish for the US economy.
In a new interview on CNBC, Mike Wilson, Morgan Stanley’s chief investment officer and chief US equity strategist, says that the bank’s “bull case” for this year is that the US government shrinks, causing unemployment to go up, pushing the Fed into cutting rates and creating a “broadening out” of the economy.
[adinserter block="1"]With DOGE already reportedly weeding out tens of billions of dollars worth of government waste, the CIO says that a more balanced federal budget could be the catalyst that boosts markets in 2025 – similar to President Clinton’s budget cuts of 1994 which preceded a parabolic advance in the stock market.
“I think they’re working on it. Probably the most underestimated part of the administration is DOGE. I think there’s a lot of skepticism on this, but the reality is that’s is possibly the most bullish thing that could happen. If you could shrink the government in a way that’s constitutional…
It’s the most exciting thing I’ve heard in a while. Remember, in the 1990s, we had this great bull market. The thing that really sparked it in my view, was the budget deal that happened in 1994. I’m not sure we can get to that kind of a balanced budget but if we can make progress on that, it liberates the private economy.”
Wilson says there isn’t a specific dollar amount that needs to be cut, just a bare of minimum of slowing down expenditures. At time of writing, the US national debt is at $36.2 trillion, up nearly $2.1 trillion in the past year.
Says Wilson,
“We just need to freeze spending, we don’t really need to cut a lot of spending, we’re running so far above trend on actual expenditures, let’s just freeze it or at least slow it down. We’re growing at a much faster rate than the economy is growing. That’s the ‘crowding out feature,’ which by the way has kept rates higher than they probably would’ve been otherwise.”
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