The shock of "Moody's" lowers the US classification will chase the markets

Moody’s has reduced the United States’ excellent credit rating by one degree to ‘AA1’ to follow the example of the ‘S&B Global’ and ‘Fitch’. Although this reduction should not actually be surprising, history indicates that such development warns in the coming weeks and months against possible disorders in the bond market, and that we are forced to face facts that we have always intentionally ignored. We can question the direct causal relationship, but indicators indicate that bad things are willing to happen when questioning the United States credit rating. When S&B reduced the classification in August 2011, the returns of US tires initially jumped ten years, but returned soon after the S&P 500 index fell, and the markets had the opportunity as an opportunity to escape to safe ports. In terms of August 2023, the impact on the market was not clear to the same extent from the first moment, although it was a hidden effect of no less dangerous. As Wall Street analysts indicated at the time, we saw this scenario before, and the case was specifically related to the “Fitch” agency, those who do not have the same antique legacy as other classification agencies enjoy. The reduction of the credit rating and the fluctuations of the mortgage, but the reduction in the classification in 2023 was equivalent to the spark that adapted a financial discussion that started in early summer, as yields on bonds increased by approximately 103 basis points during 56 subsequent circulatory sessions, to announce the next day, to announce the next day, to announce the next day, to announce the next day, the next day announce, is the announcing day to announce the next day. -Term. The “move” index of “Ice Bank of America”, which measures the implicit fluctuations in the bond market, jumped almost a similar amount to ‘fitch’, as happened after the ‘S&B’ was reduced. The issue of causal relationship remains complicated. At the beginning of the sale wave in 2023, the market seemed to praise its expectations of inflation and monetary policy. But over time, what became known as a “term bonus” by height. By September, the ‘Adrian, Chrombian and Meetch’ index of the term bonus turned into a positive level, which clearly reflects the escalation of financial problems. It was a strong storm, Fitch contributed to the introduction of its spark, and the revenue of US bonds increased for ten years at a much larger rate than its counterparts in other advanced markets such as Japan and Germany. I think a part of the story is related to what economist Christopher Sims described as ‘rational indifference’, that is, the idea that investors and other economic actors have limited time and attention, and they deal with reality based on an incomplete understanding of the facts. Simply put, we ignore a lot of information until it becomes impossible. American religion and federal deficit related to religion and federal deficit, as it is sincere for two decades. However, investors usually ignore them in their daily analyzes, and they have been ready for a long time. Those responsible for managing the strongest economy in the world can always pay off its debt (as Alan Greenspan once said, “We can always print more money”). In the foreseeable future, the United States will continue to attract buyers to its bonds (where will investors find a debt market of this size and liquidity?). Fixed revenue investors are often more useful if they spend their time analyzing inflation and labor market, or understanding the letters of members of the Open Market Committee in the “Federal Reserve”. Recently, they were also forced to delve global trade relations (and the blame here on Donald Trump, a ‘Customs -Man’), and even in legal discussions about whether the president has the right to reject the president of federal reserve Jerome Powell (I hope it will not happen, and I think it is difficult in the Supreme Court). It is clear that the US deficit is important, but it is not measured by the same scale used with other countries that do not issue global reserve currency. If America uses money, investors in the bonds will pay the price of its ‘sins’ in the form of an enlarged form. Credit classification discount asks us to think about these scenarios, and in the current context, to remind us of the fact that the United States debt has accumulated equal to almost the total of its local product. The current deficit will work around a trillion dollar annually, and Republican lawmakers work to pass a tax agreement that can add about $ 2034 to debt by 2034, according to the officials of the responsible budget committee. Will America surprisingly survive in the markets in the US markets? Of course, but it may be surprised by short -term disorders in the market, and it will require difficult changes in the medium term. Remember that the markets have ignored this issue for years. They proposed a student who was injured in his imagination during the session, and then the teacher suddenly called him. It will be a shock! Moody’s reduction in classification is perhaps just a limited part of this sudden vigilance, and it may be more as a result. It is also true that the fluctuations may go in the opposite direction, as happened in 2011 when the returns decreased as a result of investors to safe ports. But unlike 2023, the current borrowing costs begin from a relatively high level, especially in light of the risks that threaten the labor market. With the continued financial discussions in Congress, the public’s attention will remain on this issue in the coming weeks. At least in the short term, the transition from a dream to reality is a candidate to shake the markets again, as he did every last time.