US Debt Downgrade - What to Know

What Happened:?Bond / Credit rating agency downgraded US credit quality to AA+ from AAA

Further details:?Within the US there are independent credit agencies who evaluate the credit quality of corporations and governments assigning them a grade, much like a credit score. When the credit score goes down, it insinuates that the financial stability of the organization may be weaker. As a result, the borrowing rate a company or government has to pay is often higher due to the higher risk of the borrower. Think of someone borrowing for a car with a credit score of 500 vs. someone in the 900s.?

Why Do we Care?

We believe the timing of this downgrade is quite strange considering it did not happen during the hotly contested budget debt ceiling discussions a few months back. In my opinion it is a result of the most recent Fed rate hike and the fact that the US budget now has a much higher expense for interest than it did just a year ago. Considering the fact that the US already runs in the red with a continuous deficit, I do not think this additional expense is?helpful.?

While this may turn out to be a non-event, I believe there is a high probability it becomes political fodder and may result in a government shutdown as soon as October 1st.?

The equity sell off today makes sense as does the bond decline . The US dollar is strong on the news which is interesting considering, in my opinion, this may put additional pressure on the Fed to stop hiking and possibly even lower rates in the future.?

Equities have come a long way in 2023?and we suspect this is the pullback that may be needed before another round of buying sets in.

We’ll be watching the Dollar closely along with Gold, Interest Rates and of course the stock market.?

We’ll cover this topic closely as it evolves over the coming days and weeks.?

~ Until next time

Disclosures

Joule Financial, LLC is registered as an investment adviser with the SEC. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by securities regulators nor does it indicate that the adviser has attained a particular level of skill or ability. A copy of Joule’s current written disclosure brochure filed with the SEC which discusses among other things, Joule’s business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov

?

This does not constitute an offer or solicitation. This information should not be considered investment advice. Opinions expressed reflect the judgment of the author and are current opinions as of the date appearing in this material only. While every effort has been made to verify the information contained herein, we make no representations as to its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Past performance does not predict future results. Content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. All investing involves risk, including the loss of some or all of your investment.

?

Certain information contained herein constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events, results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained herein may be relied upon as a guarantee, promise, assurance or a representation as to the future.