Commentary

Potential implications of the latest U.S. debt downgrade

While it may not be a major market event, it pinpoints important fiscal concerns.

By: Anu Gaggar Brad Pineault

Updated: 5/19/2025

Key Takeaways

Moody's Ratings, a U.S. credit-rating agency, downgraded the U.S. sovereign debt rating late last week from Aaa, leading to some near-term bond and equity market volatility and exacerbating a continued decline for the U.S. dollar.
While the downgrade may not be surprising, we believe the rationale behind it crystallizes investment concerns about the U.S. fiscal situation.
The deteriorating fiscal conditions underlying the downgrade point to investor concerns that U.S. exceptionalism is likely peaking.
Looking ahead, diversification should be a major factor in asset allocation decisions.

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Potential implications of the latest U.S. debt downgrade

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