DOGE

Last week, CME Group ($CME) and Robinhood ($HOOD) delivered solid Q4 earnings reports, mostly driven by soaring crypto trading volumes. CME’s crypto derivatives were its fastest growing contracts for the year: they clocked US$10b in average daily trading volume, up 200% YoY. Robinhood shares soared 17% in after-hours trade post a Q4 consensus beat, with a record US$916m in net income. Again, that was digital coin playing a big role in real world coin: Robinhood’s crypto revenue soared 700% YoY.

President Trump’s pro-crypto stance really seems to have boosted industry sentiment last quarter. There have been changes at the SEC, a new top dog at the CFTC and an executive order that names crypto a ‘national priority.’ But the name dominating headlines lately isn’t leading crypto asset Bitcoin, its long-running challenger Ethereum, or newer high-speed rival Solana. It's DOGE. That has less to do with the meme-inspired cryptocurrency itself, and more to do with its most influential supporter: Tesla ($TSLA) CEO Elon Musk. 

DOGE discussions these days don’t really concern crypto at all, but the newly established Department of Government Efficiency, led by Musk. It’s been coming down hard on all the so-called wasteful areas of government spending. It’s only slightly ironic that the person in charge just made an unsolicited US$97.4b bid for OpenAI. Billionaire beef aside, DOGE has already cut US$1b in federal spending. And it's been pretty transparent on exactly where taxpayer funds were going before.

The Department of Education, for instance, just cancelled 89 contracts worth US$881m. Those included a US$4.6m contract to coordinate Zoom and in-person meetings, and a US$3m contract to write reports to show that prior reports were not utilised by schools. Other DOGE-induced cuts have been more controversial, with DEI and international aid programs getting the axe.

Critics say that the pace of these cuts will negatively impact employment, particularly for federal workers and those engaged in contract work. Still, like it or not, it’s in the nation’s best interest to bring down deficit spending. America’s national debt now exceeds US$36.2t, and the Congressional Budget Office estimates a US$1.9t federal budget deficit for FY25. 

If that number goes down, it will likely reduce the premium priced into the benchmark U.S. 10-year Treasury yield. In other words, there will be lower borrowing costs for corporate bonds and mortgages: good for business and good for consumers. This could increase consumer spending at a critical moment.

Retailer stocks show that things haven’t been too bad. If you owned shares in fashion brand owner Tapestry ($TPR), for instance, you’d be up 32% YTD. Or if you bought shares in Bed, Bath and Beyond’s new owner Beyond ($BYON), you’d have a neat 46% gain over the same period. However, consumer sentiment has been declining. 

Add last week’s CPI report, revealing the biggest jump in inflation since August 2023, and relief for consumers couldn't come fast enough. Consciously or not, they’ll be rooting for DOGE to meet its goal of cutting US$2t in spending by July 2026 – as long as it’s achieved without collateral damage to the broader economy.