US stock markets fell on Wednesday after credit rating Fitch downgraded US debt, blaming an “erosion of governance.”
It was only the second time in history that a leading credit agency downgraded US debt. The first was in 2011, when Fitch rival Standard & Poor’s cut the US’s triple-A rating after a nerve-racking fight between the Republicans and the Obama administration over the federal budget.
All the major US stock markets opened in the red on Wednesday, with the tech-heavy Nasdaq recording the largest fall, down 1.86%, followed by smaller drops at the S&P, down 1.19%, and the Dow, down 0.72%.
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Fitch made its decision to downgrade the US credit rating due to fiscal concerns and a deterioration in US governance as well as polarization – which was reflected in part by the January 6 insurrection, Richard Francis, a senior director at Fitch Ratings, told Reuters.
Fitch downgraded the US to AA+ from AAA on Tuesday, citing fiscal deterioration over the next three years and repeated down-to-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.
“It was something that we highlighted because it just is a reflection of the deterioration in governance, it’s one of many,” he said. “You have the debt ceiling, you have January 6. Clearly, if you look at polarization with both parties ... the Democrats have gone further left and Republicans further right, so the middle is kind of falling apart basically.”
