Market Melt-Up, Courtesy of Elon

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This time last week, everyone was losing their minds over Trump’s threats to impose a tariff on our major trading partners.

The mainstream media, establishment, and “smart” money were all screaming at the top of their lungs that it would mean the end of the world as we know it.

Well, as we all know now, the end result has fallen short of apocalyptic.

Trump quickly got some concessions and positioned America to reap more benefits.

Meanwhile, the S&P 500 has shaken off all the volatility and is just a few points from its all-time high.

As the 1% went nuts about tariffs, they were even more upset about Elon Musk and the Department of Government Efficiency (DOGE) dismantling the U.S. government.

Last week, I posed the question “What if Trump’s wrecking ball approach to the status quo actually puts America in a better position?”

Today, I want to ask the same question about Elon Musk and DOGE.

The DOGE Is Loose

As a result of DOGE’s initial analysis, Musk has convinced Trump to undertake dramatic actions.

Following the playbook that he employed at X, Musk encouraged Trump to shut down various payments and government agencies.

The idea is that the best way to find wasteful spending is to shut it all down and then figure out what you really need in the first place.

This can be a volatile approach, but it’s remarkably effective and quickly deals with inefficient legacy bureaucracies.

The decision that has attracted the most ire from the establishment has been the shutdown of the United States Agency for International Development (USAID).

This agency was originally established by President John F. Kennedy with the goal of providing foreign aid to further American interests.

It was further solidified by an act of Congress in the 1990s, making it an official independent agency of the U.S. government.

Honestly, I had only heard of it once or twice before and didn’t really know much about it.

Apparently, they are spending $50 billion per year and employ over 10,000 employees.

Now, the principle of this agency makes a lot of sense. Give out foreign aid to help other countries and their people, and do so in a manner that furthers American strategic interest.

Like anything touched by the government, though, the reality after six decades has turned into something much more complicated and wasteful.

Here is a post from X of White House spokesperson Karoline Leavitt going through a short, select list of USAID spending.

This brief overview received the most media coverage, but more detailed accounts have been out there.

Now, I am not writing you today to do a deep dive into whether taking this approach is the right move.

I suspect that some real damage will be done, and valuable programs will be (at least momentarily) lost. I also think that huge waste and graft will be uncovered and eliminated.

Ultimately, I think this will be a painful, but necessary, method to get us to a result we all desire: a more efficient government.

What interests me most, though, is the potential impact on the stock market.

A Fire Has Been Lit. But Will it Catch?

Musk has come out saying that his goal is to bring down U.S. government spending by $1–$4 billion per day.

To put that in perspective, that would represent 5%–20% of the current U.S. government budget deficit. Perhaps, that is not a total game changer. But it certainly is a change in direction.

One of the biggest and most valid bear arguments out there is about this deficit. It has relentlessly gone higher, and it feels like it will never get better.

Neither political party seems to have the will to stem the tide, not when they and their cronies are the ones getting paid.

If Musk can make a dent — even a small one — then it is a glimmer of hope.

Given the one-sided nature of the current consensus opinion on U.S. government debt, I think this could light a match under stock market bulls.

This goes back to what I said last week about what could happen to the stock market if the Trump tariffs worked and created positive value for America.

The same applies to Musk’s DOGE efforts.

If we think that we actually have a chance of reducing the deficit, then a huge portion of the bear case is badly damaged.

Even if it’s only momentarily, I think this could be the catalyst for a 1999-style melt-up in stock prices.

One last thing to consider is how this bull market compares to similar ones in the past…

This Bull Has Room to Run

Here is a great chart from Bespoke Investment Group showing the average duration and returns of bull markets going back to 1929.

With the current bull market at 834 days and a positive 71% return, we would be about two-thirds of the way through an average bull market.

However, most bull markets of the last 40 years have far exceeded the average.

I think a win for Trump and Musk is a win for America — and for stock investors, too.

It will drive the media, establishment, and “smart” money crazy. But it will help everyone else!

To Making YOU Money,

Enrique Abeyta