Closing post
Time to wrap up…
Moody’s downgrading of the US Aaa credit rating to Aa1 has sent a shiver through financial markets.
Although the downgrade is not expected to have widespread ramifications, it has focused attention on the US’s tricky fiscal position, with debts of $36trn and interest ccosts rising.
US government bond prices have fallen today, pushing the yield on 30-year Treasury bonds over the 5% mark to an 18-month high.
Stocks also fell at the start of trading on Wall Street, following losses earlier today in Asia-Pacific markets and in Europe.
The dollar has dropped by around 0.8%, lifting the pound to $1.336 – up almost a cent today.
The VIX index, a measure of fear on Wall Street, jumped.
Oliver Faizallah, head of fixed income research at Charles Stanley, sume up the situation:
“From a high-level view, the downgrade from AAA to Aa1 is unlikely to move markets materially, however, it does highlight the well flagged issues in the US that are currently driving a higher term premium.
Moody’s new rating is in-line with the current rating of AA+ by Fitch and S&P.
Moody’s cites a rise in US federal debt over the past decade as well as continuous fiscal deficits. Neither point is new news to the market and have weighed on term premiums in the US for some time (investors have demanded a higher yield for holding longer dated US govt. bonds).
Many UK investors have US asset classes in their portfolios - in fact our latest research shows that 41% of UK DIY investors increased their exposure to US equities in the three months to May* - and there shouldn’t be cause for concern for now. However the rating change shows the need for a high level of vigilance of developments across the pond from an investor’s perspective.
Concerns over the economic cost of the US trade wars has risen, with the European Commission cutting its forecast for eurozone growth this year.
The number of billionaires in the UK has grown sharply – from 15 in 1990 to 165 in 2024 – at the same time as inequality in the UK’s overall wealth distribution has dramatically increased, analysis has found.
Timed to coincide with the Sunday Times’ rich list, the Equality Trust’s investigation also found that billionaires have become “ludicrously” more wealthy, with their average wealth skyrocketing by more than 1,000% over the same period.
The top 50 richest families in the UK now hold more wealth than the poorest half of the population, comprising more than 34 million people. In 2024, the two richest UK billionaires held more wealth between them than all the billionaires in the 1990 rich list combined.
