The New York stock market closed slightly up on the 19th (local time), the first trading day since Moody's downgrade of the U.S. national credit rating. After starting lower at the beginning of trading, the market saw a surge of bargain hunters and ultimately succeeded in turning upward. Moody's downgraded the U.S. national credit rating from 'Aaa' to 'Aa1' for the first time since 1917, citing the U.S.'s liability issues, but the market has forecast this not as merely a negative factor but as the beginning of a new era.
Market sentiment indicates that the downgrade of the U.S. credit rating had been anticipated, suggesting that uncertainty has been alleviated. Ross Mayfield, an investment analyst at Baird, noted, "The Moody's report simply reiterated the financial situation of the U.S. that all investors already know" and added, "It fundamentally did not alter our outlook projecting strength over the next 6 to 12 months."
Clearly, the downgrade of the national credit rating is a negative factor for the stock market, regardless of opinions. However, in this case, it appears that alleviation of uncertainty has moved investors more significantly than fear. In fact, in August 2023, when the credit rating agency Fitch downgraded the U.S. credit rating, the U.S. stock market fell 1.4% on that day, but the VIX fear index also showed a decline.
In fact, some analysts in the securities industry have interpreted this situation as saying, "The downgrade of the credit rating does not create new changes, but rather reflects changes in the era." It has been proven that the U.S. government's expenditure cuts are difficult and that returning to past low interest rates is challenging. This suggests that investors should propose investment strategies suited to the situation rather than feeling fear.
NH Investment & Securities released a joint report stating, "For the downgrade of the national credit rating to serve as a trigger that shakes the financial market, the event must be novel or the entity managing the situation must be powerless, but neither condition applies here." They analyzed that while it may serve as a justification for the adjustments in stock prices that have risen for a month, the decline and duration are limited.
Rather, they advised that in the long term, a downgrade of the credit rating cannot prevent changes in the era, and investment strategies should be adapted to the situation.
The report stated, "Long-term asset revenue target will likely be lower than before" and analyzed that "Large-cap stocks that can withstand high long-term interest rates and structural growth stocks are relatively advantageous."
On the same day in the U.S. market, as fears of a credit rating downgrade led to a decline at the beginning of trading, bargain buying picked up.
Michael Wilson of Morgan Stanley also highlighted in a report that as trade tensions with China eased, the likelihood of recession decreased, stating, "If stocks drop due to the credit rating downgrade, it presents a buying opportunity."
Max Kettner of HSBC Holdings asserted, "For the U.S. 10-year Government Bonds yield to negatively affect the stock market, it must enter the danger zone," adding, "Until then, stock market declines represent an opportunity for increased buying."