Risk appetite in the general marketplace so far this week is still not robust after Moody’s Investor Services downgraded the United States’ long-term credit rating from Aaa to Aa1 on Friday, May 16, citing sustained increases in federal debt and chronic fiscal deficits. The move by Moody’s followed similar moves by Fitch and S&P Global ratings agencies.
I admit that when I saw the news after markets closed on Friday, I did not figure it would be a front-burner markets matter, given the actions already taken by Fitch and S&P Global quite some time ago. While Moody’s debt downgrade of U.S. government debt was not a shocker, it was a stark reminder to the general marketplace that the U.S. has a problematic debt burden. All it would take is a change in global investor perceptions to start the financial market dominos falling.
