QUESTION: is the credit rating downgrade a big deal?
ANSWER: Yes.
The US debt markets have been the global benchmark for decades, but now with political disfunction it isn’t certain that global, or even US markets, are
ACTION PLAN: Fitch Ratings’ credit downgrade of the US was well considered and appropriate with the further breakdown of political system in the US. The decline started in 1994 when Newt Gingrich started the “Contract with America” which was rubbish economics but aimed at the “deporables”. FoxNews, which was entertainment masquerading as news at the time (and still is) took up the idea to boost it viewer ratings. By 2020, 74m Americans voted for DonaldTrump despite his inability to coherently to string a couple sentences together and some serious ethical issues and poor financial management, but it wasn’t enough to overtake the 81m who voted for Joe Biden. Last week, a Gringrich’s successor to the House Speakership, KevinMcCarthy, suggested various “Deep State” plots (but no fake moon landings, yet). There are now not an insignificant number of Republicans in Congress who would be willing to shut down the government to facilitate regime change and help Trump get back into power, and avoid the possibility of his criminal conviction. This is not a sign for political or currency or interest rate stability. It will also affect the premium that US stocks trade at, and the value of equity indices.
ACTION PLAN: Review your stock holdings and ask yourselves are these stocks priced for perfection or are there better global alternatives. Contact TurnerStreet if you wish to buy the list of the stocks it buys for a typical wholesale client, or if you would like TurnerStreet to manage your equities and derivatives portfolio.