Moody’s downgraded the U.S. credit rating from Aaa to Aa1, citing rising debt, high interest costs, and long-term fiscal risks. Following earlier downgrades by S&P (2011) and Fitch (2023), the U.S. has now lost AAA status across all major rating agencies.
The move triggered a spike in the 30-year Treasury yield to 5% and widened CDS spreads, reflecting growing market concern. Should we worry about a looming U.S. debt crisis? What does this mean for your investments?
When the A-Team Breaks Up
The U.S. loses its last AAA credit rating:
Moody’s downgraded the U.S. credit rating from Aaa to Aa1 due to rising debt levels, high interest expenses, and long-term fiscal risks. This follows earlier downgrades by S&P in 2011 and Fitch in 2023, marking the complete loss of AAA status across all major rating agencies. The downgrade triggered a spike in the 30-year Treasury yield to 5% and a rise in credit default swap (CDS) spreads, signaling increased market concern.
U.S.-China trade truce fuels short-term market optimism:
A temporary 90-day tariff reduction deal between the U.S. and China led to a strong rally in global equity markets and a sell-off in safe-haven assets. However, the agreement mirrors past episodes that ultimately unraveled, and unresolved issues around technology, strategic resources, and currency policy suggest that risks to a lasting resolution remain high.
U.S. retail sales remain resilient amid cooling inflation:
April data showed steady retail growth, particularly in services and e-commerce, despite tariff-related weakness in goods like automobiles and apparel. Inflation indicators cooled, reinforcing expectations for Federal Reserve rate cuts later in 2025. Strong employment and wage growth continue to support consumer spending and broader economic stability.
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