Credit Downgrade

What does this weekend's credit downgrade mean for stocks? Detailed analysis below..

Last week was another big one for US stocks with the S&P 500 advancing all 5 days and tacking on +5% overall. The SPX has now rallied +19% from April Liberation Day lows, which means the index is now flat YTD.

The big news this weekend was the Moody’s US Credit Rating downgrade, sending US equities lower this morning as the 30yr breaks 5% and the 10yr back through 4.5%. Objectively, Moody’s downgrade lags the other rating agencies, which have all downgraded the US from AAA within the last 15 years. With that said, the big question will be whether or not there remains debt holders who require at least 1 AAA rating to hold debt. Most of the commentary I’ve read seems not particularly worried as these goal posts can be moved.

Looking back, there have been 2 major credit downgrades for US debt: the August 2011 debt downgrade and the October 2013 debt downgrade.