<\/p>\n
\n \n In May, Moody’s downgraded the U.S. credit rating from the highest possible Aaa level to Aa1. At that time, the agency cautioned that political issues could lead to further downgrades if they result in significant economic repercussions. Moody’s stated, “The rating also could be downgraded if policy effectiveness or the strength of institutions were to erode to such a degree that materially weakens the sovereign’s credit profile.” This could occur due to a decline in medium-term growth, economic resilience to shocks, or substantial moves away from the U.S. dollar.\n <\/p>\n \n The potential for a downgrade has led JPMorgan’s trading desk to alert clients about a “tail risk” associated with a government shutdown this week. A further cut to the credit rating could negatively impact U.S. Treasurys, driving yields higher. This, in turn, would likely affect stock prices by increasing companies’ cost of capital and diminishing the future value of earnings.\n <\/p>\n \n President Donald Trump is currently meeting with top Congressional leaders to negotiate a deal before the looming Wednesday deadline. He has warned of mass layoffs of federal employees if a shutdown occurs, which could distinguish this situation from previous ones. Historical data indicates that markets have typically brushed off government shutdowns, but some market participants are questioning whether this shutdown could have a different impact due to the current fractured political climate and the health of the national economy.\n <\/p>\n \n For the time being, bond traders and economists do not appear overly concerned about the risks, although they are keeping an eye on the situation. Chris Rupkey, chief economist at FWDBONDS, noted that a downgrade would likely be viewed as a “technicality” for the Treasury market, which has demonstrated resilience in the face of prior cuts and concerns regarding national debt. Additionally, bond traders anticipate that Treasury Secretary Scott Bessent will intervene if significant issues arise.\n <\/p>\n \n RSM Chief Economist Joe Brusuelas expressed skepticism about the likelihood of a credit rating downgrade. However, he cautioned that if the shutdown is not resolved quickly, a decline in hiring and business investment in the U.S. could be expected. “My sense is that market risk around another government shutdown is minimal,” Brusuelas stated. “Market participants have been conditioned to the never-ending fiscal follies in Washington.”\n <\/p>\n<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":" Markets have generally remained unfazed by past government shutdowns, but the current situation may signal a shift. If the shutdown reveals a new level of U.S. government ineptitude, it could prompt rating agencies to reassess the already fragile state of U.S. creditworthiness. Recently, the Labor Department announced it is preparing a contingency plan for a […]<\/p>\n","protected":false},"author":1,"featured_media":1992,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28],"tags":[],"class_list":["post-1991","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"_links":{"self":[{"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/posts\/1991","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/comments?post=1991"}],"version-history":[{"count":0,"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/posts\/1991\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/media\/1992"}],"wp:attachment":[{"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/media?parent=1991"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/categories?post=1991"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/tags?post=1991"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n
\n
\n Markets have generally remained unfazed by past government shutdowns, but the current situation may signal a shift. If the shutdown reveals a new level of U.S. government ineptitude, it could prompt rating agencies to reassess the already fragile state of U.S. creditworthiness. Recently, the Labor Department announced it is preparing a contingency plan for a potential news and data blackout should the government suspend operations, indicating that the Trump Administration is bracing for the worst.
\n <\/span>
\n <\/span>
\n <\/span>\n <\/p>\n