this is the shocking headlines that must have caught many, many eyeballs when rating agency, standard and poor's downgraded us debt to AA+ yesterday which has warned that it may do so some weeks ago.
us debt is now rated AA+, (for the very first time since 1941) which is one notch down from the coveted AAA rating, the highest possible but s&p decided to maintain its negative outlook on the long-term debt, although both the short and long-term ratings have been removed from 'creditwatch'.
standard and poor's explained its decision on 3 main factors viz:
1. The incapacity of Congress to work together (reflected in part in that to some extent politicians have tended to go for the ‘low-hanging fruit’ as regards expenditure cuts, as well as the lack of new revenue measures)
2. The now lesser likelihood that the 2001 and 2003 tax cuts for high-earners will be allowed to expire from 2013 onwards.
3. The recent downward revisions to GDP estimates, on the past 29th of July, which underscore the historically subdued pace of the recovery in economic growth.
my comments:
the downgrade comes amid market sentiment already jittery with the ongoing concerns on the eurozone debt issues and the slowing global economy.
generally, the downgrade will definitely translate into more uncertainty in the market place and the reaction of the global markets when they open after the weekend although (as an indication), the dubai and tel aviv bourses have registered huge falls.
with greater uncertainty, one thing may be certain, meaning there will be a shift to safer haven instruments of which one is in wealth protection solutions.
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