Following Moody’s Investors Service’s downgrade of the US credit rating outlook from stable to negative, U.S. stock futures fell on Monday.
Futures for the Dow Jones Industrial Average dropped 78 points. Futures linked to the Nasdaq-100 down 0.4%, while those linked to the S&P 500 fell more than 0.3%.
Moody’s cited partisan gridlock in Washington and the “extremely high” budget deficits in the United States as contributing causes to the downgrade on Friday. America’s AAA credit rating, the best possible, was confirmed by the ratings agency. This comes three months after Fitch downgraded the long-term foreign currency issuer default rating of the United States from AAA to AA+, citing political impasse over debt and fiscal difficulties as well as anticipated fiscal deterioration.
“With rising interest rates, and in the absence of efficient fiscal policy tools to curtail public expenditures or boost revenue,” the organisation declared. The US fiscal deficit is expected to stay extremely high, greatly impairing the affordability of debt, according to Moody’s.
According to Infrastructure Capital Management CEO Jay Hatfield, even if there is “zero default risk of U.S. debt,” the loan’s reduced credit rating outlook has an effect on how appealing it is to international investors.
Because our budget process is so flawed, the United States has been demoted. The lack of a genuine, structured procedure to approve a budget is really the main problem. Ambassadors for the Global Fund are affected psychologically by that, according to Hatfield.