Standard & Poor’s today issued a surprise debt warning to the US Government, downgrading its outlook from ‘stable’ to ‘negative’. The unprecedented move comes as the US Government struggles to agree a budget, and sent stocks plunging, with the DJIA, S&P 500, and NASDAQ all seeing significant falls.
Tim Roberts, North America Fund Manager at Cavendish Asset Management, comments:
“This is obviously bad news for the markets, and was sprung on them in quite an unexpected manner. Yet the rationale is obvious; US debt continues to spiral, its fiscal profile looks ever weaker, and the ongoing, stuck-in-the-mud wrangling over the budget is hardly sending reassuring signals to investors. The move is shocking because of the historical taboo that has been broken, but if this were any nation other than the US we would have expected this before now.
“Nonetheless, it is hardly time to panic. It is unlikely that S&P will downgrade US debt over the coming years. The US will continue to be able to repay its debt, and will eventually get itself back onto a firmer fiscal footing. This will hopefully serve as a shot across the bow to the politicians on Capitol Hill who are currently playing political brinksmanship over the budget, putting further pressure on them to agree a deal”
