On Friday, after market close, S&P downgraded the US’s debt from AAA to AA+, or one notch.
This downgrade should be of no surprise to any professional investor as this has been telegraphed for almost six months.
We first began commenting on the implications and possibilities in our Taps related post in April, then again in June, as Fitch joined the pile and later in July, as it appeared eminent a downgrade would occur.
While we question the delivery date of the actual downgrade (it was a very busy week last week across the world) and certainly do not look forward to the possibility of higher debt related interest rates longer term, if this downgrade catches professional investor’s by surprise we will be disappointed.
Just as I have to warn my son, not once, twice, or three times, not to do something, and then he is still surprised at the punishment when the “time out” words are spoken, this will be the case with Wall Street this week if they are caught by surprise.
We would expect some gyrations early in the week and hope for muted responses from Wall Street Professionals as the news settles in across the world.
For this to be earth shattering news the likes of a sucker punch from the credit agencies, we would strongly question the motives of the entity delivering the statement.
The good news is we do not have to wait very long to find out what the grade of our Wall Street Pro’s !
Have a Great Day!
JK
Moody’s Credit Agency Jumps on Board and Downgrades 10 Banks along with “Keep an Eye Out” for More ….
Just Friday we mentioned Fitch Credit Agency Played Eye Spy and downgraded the USA credit worthiness by a very small amount from AAA to AA+…. the Eye Spy was due in part to the very large government spending acceleration number that showed up in the overzealous GDP print ….
Not to be outdone, a fellow credit agency, Moody’s chimed in as well
Moody’s Downgrades 10 Banks – Keep an eye on Others
As reported here by Reuters, Moody’s jumped into the pool and downgraded a slew of banks as well as put many on watch….
As mentioned in our post on the Fitch Downgrade, the US interest rates moved up after the ratings increase…. it would be expected all banks involved to see their standards tighten as well as their borrowing costs rise as well….
Why is this important you may ask?
This second rating decrease, by Moody’s will in effect help the FOMC in their pursuit of slowing the economy. Banks will broadly tighten lending standards!!
Have a Great “Moody’s Jumps into the Pool Downgrade” Day!
John A. Kvale CFA, CFP
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Posted in Debt - Debt Management, Economy, Education, Investing/Financial Planning, Market Comments
Tagged Debt Downgrade, Fitch, Moody's, Rating Downgrades