US Credit Downgrade Turns Spotlight on Fiscal Risks
The US was stripped of its final triple-A credit rating when Moody’s downgraded the nation’s government debt.
Donald Trump’s victory in the US presidential election rippled through financial markets in the hours after news agencies projected that he will return to the White House. The Dow, S&P 500 and tech-heavy Nasdaq Composite jumped to new record highs, the dollar index registered its biggest one-day gain in two years, and Treasury yields added to recent gains as investors began to digest the election’s potential impact on Wednesday.
A busy week for the US continued on Thursday when the Federal Reserve delivered a rate cut of 25 basis points, as expected, to further ease monetary policy as inflation subsides and cracks emerge in key indicators for the labor market. Last Friday, the Labor Department reported an increase of only 12,000 jobs in October, reflecting a strike at Boeing, disruptions from major hurricanes, and weakness in private-sector hiring. Meanwhile, the Bank of England also cut rates by a quarter-point but cautioned against reducing rates “too quickly” going forward amid inflationary pressures. With the outcome of presidential and congressional elections set to reshape the power structure in Washington, PGIM gathered a panel of experts to discuss potential US policy shifts, the global economic outlook, and market implications.
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