Investor Danny Moses, known for predicting the 2008 financial crisis, is now warning about the market’s underestimation of the economic impact of federal spending cuts led by the White House DOGE office, with Tesla CEO Elon Musk as its public face.
Moses stated, “I think we are underestimating the impact to the economy of the cuts we’re making at the federal government, and what that might mean in terms of knock-on effects.” He added, “I think we’re hurting the revenue side of the equation.”
The cost-cutting measures have resulted in the firing of at least 25,000 federal probationary workers across 18 agencies, though the fate of many jobs remains in legal limbo. This upheaval could threaten safety nets like Social Security and Medicare, relied upon by tens of millions.
Musk and Trump claim much federal spending is “wasteful” and “fraudulent,” but no publicly available evidence exists of fraud within the federal government.
Economic uncertainty has also followed Trump’s tariffs, raising recession fears. The S&P 500 struggled to regain ground after a sharp pullback and remains about 8% below its February all-time high.
Moses believes first-quarter earnings reports will likely reveal signs of a market slowdown, with consumer confidence already showing weakness. He warned investors could face a potential shock as the risks of an economic downturn haven’t been fully priced into the markets yet.
“When your debt-to-GDP is over 120%, you really can’t afford to make a mistake,” Moses said, referring to America’s government debt-to-GDP ratio. “I think we are being overly optimistic about how this is going to play out.” — news from Business Insider