When Elon Musk was appointed to oversee the Department of Government Efficiency (DOGE) alongside Vivek Ramaswamy in late 2024, market participants were optimistic that the bloated government spending dominating headlines would finally be curbed. During his presidential campaign, Trump pledged to cut bureaucratic excess and reduce taxpayer burdens, emphasising that DOGE would modernise federal operations.
More than half a year later, the results are, at best, mixed and, at worst, shockingly underwhelming. Vivek Ramaswamy resigned less than three months into his tenure, with Elon Musk reportedly having “made it known that he wanted Ramaswamy out of DOGE,” according to Politico. This left Musk solely in charge, with full reign to tackle the estimated $2 trillion in federal spending identified for potential cuts. Musk had initially pledged to reduce the next fiscal year’s federal budget by $1 trillion by 30 September but later revised this figure downward by 85% to $150 billion, a target the New York Times considers highly unachievable. The paper cites billion-dollar accounting errors and claims of budget cuts to programs that did not even feature in the next year’s plans. Moreover, a key motivation behind DOGE’s creation, the ballooning US fiscal deficit, remains unaddressed. As of 9 May, the federal deficit had increased by $196 billion, with little indication of any substantial reduction in the near term.
Musk recently announced that he would be scaling back his involvement in DOGE to dedicate more time to Tesla, where he currently serves as CEO. Tesla has been grappling with declining sales in key markets and product delays, issues that have prompted shareholders to question where Musk’s priorities truly lie. Posting on X, he stated: “Accelerating GDP growth is essential. DOGE has and will do great work to postpone the day of bankruptcy of America, but the profligacy of government means that only radical improvements in productivity can save our country.” This pro-growth stance has contributed to a rise in long-term bond yields, now exceeding 4%, which account for a continuance of high inflation associated with these measures.
A rising inflationary outlook reduces the appeal of bonds. However, we believe they are deserving of a moderate allocation in balanced portfolios owing to the diversification benefits they provide in uncertain times. At yields of approximately 5%, we believe they can deliver inflation-beating returns for risk-averse investors.
Unless otherwise stated, all performance and statistical figures provided in this article have been pulled from Bloomberg by the High Street Asset Management Research Team on 27 May 2025 and all the images provided in this article have been sourced from FreePik and have been used in line with their Acceptable Use Policy The contents of our newsletters are frequently sourced from or verified through our various product providers and other third parties. Although every effort is made to ensure the accuracy of the information contained in the newsletter, it should not be construed as financial advice as defined in the Financial Advisory and Intermediary Services Act. Links are provided to third-party websites for convenience only. High Street Asset Management (Pty) Ltd cannot accept responsibility and does not endorse any information contained on a third-party site. For our full disclaimer, please see: https://hsam.co.za/legal/.
