Renowned Investor Danny Moses Issues Warning on Federal Spending Cuts and Market Risks
Danny Moses, the investor who correctly predicted the 2008 financial crisis, is once again sounding the alarm—this time about the market’s failure to account for the economic impact of aggressive federal spending cuts.
According to Moses, founder of Moses Ventures, the economy may face unforeseen consequences due to the government’s budget reductions, which could lead to a financial downturn that investors have yet to fully price in.
“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,” Moses stated on CNBC’s Power Lunch with Kelly Evans. “I think we’re hurting the revenue side of the equation.”
How DOGE Cuts Could Impact the Economy
Federal cost-cutting measures, spearheaded by the White House DOGE office and publicly supported by Tesla CEO Elon Musk, have led to the firing of at least 25,000 federal probationary workers across 18 agencies within months. However, the fate of many of these jobs remains in legal limbo.
These drastic budget cuts could have ripple effects across critical programs such as Social Security and Medicare, which millions of Americans rely on for financial stability. While Musk and former President Donald Trump have claimed that excessive government spending is “wasteful” and “fraudulent,” there is no public evidence to suggest that fraud has been committed at any significant scale.
Market Uncertainty and Recession Risks
Beyond the impact of DOGE cuts, uncertainty over Trump’s fluctuating tariff policies has further exacerbated fears of an economic slowdown. The S&P 500 has struggled to regain lost ground following a sharp pullback, currently sitting approximately 8% below its all-time high from February.
Moses warns that upcoming first-quarter earnings reports could reveal early signs of a market slowdown, with consumer confidence already showing signs of weakness. He also cautions that investors may be in for a significant shock when the economic downturn materializes in financial reports.
“When your debt-to-GDP is over 120%, you really can’t afford to make a mistake,” Moses explained, referencing the U.S. government’s debt-to-GDP ratio. “I think we are being overly optimistic about how this is going to play out.”
Key Takeaways for Investors
- Federal Spending Cuts Pose Economic Risks – Reductions in government spending could have long-term consequences for essential programs and economic growth.
- Stock Market Volatility Continues – The S&P 500 remains under pressure, struggling to recover from its recent dip.
- Potential Economic Slowdown Ahead – Weak consumer confidence and upcoming earnings reports may expose further cracks in the economy.
- Debt-to-GDP Concerns – With the U.S. debt-to-GDP ratio exceeding 120%, economic missteps could have severe repercussions.
As the market navigates these challenges, investors should closely monitor economic indicators and adjust their portfolios accordingly. With uncertainties surrounding federal spending policies and market reactions, maintaining a diversified investment strategy could be crucial in mitigating potential risks.
