The fun begins - Moody's lowers the government rating from Stable to Negative.

SeattleStamina

Moderator
On Friday, Moody's Investors Service revised its outlook on the United States government from stable to negative, citing increasing risks to the nation's fiscal strength. The ratings agency maintained the U.S.'s long-term issuer and senior unsecured ratings at Aaa.

Moody's expressed concern about the potential impact of higher interest rates on the U.S. economy, emphasizing the necessity of effective fiscal policy measures to either reduce government spending or increase revenues. Without such measures, Moody's expects that the nation's fiscal deficits will persist, significantly compromising debt affordability. Political brinkmanship in Washington was identified as a contributing factor, with the agency highlighting the risk of ongoing political polarization hindering consensus on a fiscal plan to address declining debt affordability.

Despite maintaining the Aaa rating, Moody's stated that the U.S. must retain its exceptional economic strength to mitigate the deterioration in debt affordability. The agency suggested that positive growth surprises over the medium term could help slow this decline.

Deputy Secretary of the Treasury Wally Adeyemo disagreed with Moody's shift to a negative outlook, asserting the strength of the American economy and the global prominence of Treasury securities.

Moody's decision coincided with the looming threat of a government shutdown, as Congress grapples with funding issues. While the government is funded through November 17, lawmakers remain at an impasse over a bill before the deadline. House Speaker Mike Johnson (R-La.) plans to release a Republican government funding plan, proposing funding for certain parts of the government through Dec. 7 and other parts through Jan. 19. However, this plan, known as a laddered continuing resolution (CR), faces opposition in the White House and the Democratic-controlled Senate.

The White House press secretary, Karine Jean-Pierre, attributed Moody's negative outlook to Congressional Republican extremism and dysfunction. In August, Fitch had previously downgraded the U.S. long-term foreign currency issuer default rating to AA+ from AAA, citing expected fiscal deterioration, governance erosion, and a growing debt burden, with feuding in Washington contributing to the downgrade.
 
@smkelly86 , you mentioned this was informative. Allow me to elaborate a bit further. My hypothesis is that the government is more likely than not to shut down due to the partisanship issues on Capital Hill. Due to this tumultuous event, this will create some great opportunities in the stock market.
 
@smkelly86 , you mentioned this was informative. Allow me to elaborate a bit further. My hypothesis is that the government is more likely than not to shut down due to the partisanship issues on Capital Hill. Due to this tumultuous event, this will create some great opportunities in the stock market.
Feel free to add your thoughts as this could be an interesting debate.
 
Hi @SeattleStamina, Thanks for the elaboration and your hypothesis regarding the potential government shutdown and its impact on the stock market. I do find your perspective on potential opportunities in the stock market interesting even though I an not an investor myself with minimal knowledge on the topic. I would say, however, that while I definitely understand your point about partisanship issues likely to result in a government shutdown and how this would create "great opportunities in the stock market" my understanding is that even when the government faces shutdowns, the overall impact on the stock market tends to be short-term and many investors and analysts believe that the market tends to rebound quickly after temporary setbacks.
 

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Hello @smkelly86 , thank you for validating my point in terms of an opportunity. Per your own words,
"understanding is that even when the government faces shutdowns, the overall impact on the stock market tends to be short-term and many investors and analysts believe that the market tends to rebound quickly after temporary setbacks."
Further elaborating the commentary with a focus on a few keywords - short-term | rebound.

I find this short-term impact to be a grave opportunity. A smart investor will ride the market down, and once the shutdown has been lifted, ride the market back upwards.

Of course, this is a risky move, but calculated correctly, this could be a lucrative opportunity.
 
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Hello @smkelly86 , thank you for validating my point in terms of an opportunity. Per your own words,

Further elaborating the commentary with a focus on a few keywords - short-term | rebound.

I find this short-term impact to be a grave opportunity. A smart investor will ride the market down, and once the shutdown has been lifted, ride the market back upwards.

Of course, this is a risky move, but calculated correctly, this could be a lucrative opportunity.
Thank you for the explanation. It is apparent that you are well informed on the topic and are moving cautiously while taking advantage of such an opportunity. The stock market can be unpredictable and, as you said, “risky”, so while I believe it is important to take your time and not invest too much too quickly, it sounds like you have set yourself up for success. I wish you the best of luck with your investments. Although it seems like you might not need it. 😉 Have a great day.
 
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