Monday saw a decline in U.S. stock futures following Moody’s Investors Service’s downgrade of the country’s credit rating outlook from stable to negative.
Tomorrow’s Dow Jones Industrial Average dropped six points. Both the Nasdaq-100 and S&P 500 futures saw a 0.2% decline.
The “extremely significant” budget deficits in the United States and the political deadlock in Washington, D.C., were highlighted by Moody’s on Friday as reasons for the downgrading. America’s highest credit rating of AAA was confirmed by the rating agency. The U.S. long-term foreign currency issuer default rating was downgraded by Fitch to AA+ from AAA three months prior, citing political impasse over debt and fiscal issues, rising debt levels, and anticipated fiscal deterioration.
“Without effective fiscal policy measures to decrease government spending or enhance revenues, in the environment of increased interest rates,” the agency stated. “Moody’s forecasts the fiscal deficits in the United States to continue quite substantial, severely reducing the affordability of debt.”
According to Infrastructure Capital Management CEO Jay Hatfield, even if there is “zero default risk of U.S. debt,” the lower credit rating outlook is nevertheless significant since it affects how appealing the debt is to overseas investors.
“Due to a seriously flawed budget process, the United States has been downgraded.” The fact that there isn’t a true, structured procedure for passing a budget is really the main problem. Global Fund Ambassadors’ mental health is affected by that, according to Hatfield.
Source (CNBC)
