moody's sounds alarm: us credit rating slips, 'sell america' trend returns

2025-05-19 general

New York, Monday, 19 May 2025.
moody’s has downgraded the u.s. credit rating, triggering market anxiety and a rise in treasury yields to 5%. this shift could signal a ‘sell america’ wave, impacting investment strategies across the board. the downgrade, driven by concerns over ballooning budget deficits, marks the end of the u.s.’s triple-a status with all major rating agencies. gold prices are surging, and experts warn of potential large-scale selling of u.s. debt. the downgrade may increase scrutiny on the u.s.’s economic policies and fiscal management.

Market reaction and investor sentiment

Stock futures are indicating a negative start to the week. Dow Jones Industrial Average futures dropped by 0.79%, equivalent to 337 points [2]. S&P 500 futures experienced a fall of 0.97%, while Nasdaq 100 futures declined by 1.19% [2]. Peter Boockvar, chief investment officer at Bleakley Financial Group, suggests that reduced foreign demand and the necessity to refinance growing debt will persist [2]. This sentiment is echoed by Max Gokhman, the deputy chief investment officer at Franklin Templeton Investment Solutions, who anticipates rising borrowing costs as major investors shift from treasuries to safer assets [4].

treasury yield surge and dollar vulnerability

The yield on 30-year treasury bonds has reached 5%, a level last seen in November 2023 [1][4]. Experts at Wells Fargo anticipate yields for 10-year and 30-year treasuries to increase by an additional 0.05% to 0.10% due to moody’s downgrade [4]. Simultaneously, concerns about u.s. debt could weaken the dollar, with the bloomberg dollar index nearing april lows and option traders showing the most bearish sentiment in five years [4]. European central bank president Christine Lagarde noted that the dollar’s recent decline against the euro reflects a loss of confidence in u.s. policies [4].

moody’s rationale and long-term projections

Moody’s downgraded the u.s. credit rating from aaa to aa1, citing a failure by successive administrations to address growing budget deficits [1][4]. The ratings agency projects that the federal deficit will rise to nearly 9% of gdp by 2035, up from 6.4% in 2024, driven by increased interest expenses and welfare spending [3][4]. Consequently, the federal debt burden is expected to increase from 98% of gdp in 2024 to approximately 134% by 2035 [3]. These projections underscore the long-term fiscal challenges facing the united states [GPT].

geopolitical implications and trade tensions

China’s holdings of u.s. debt decreased to $765.4 billion in march, a reduction of $18.9 billion [5]. This trend reflects a broader diversification of china’s foreign exchange reserves, including increased gold holdings [5]. Concurrently, president trump’s tariff policies are adding complexity to the economic landscape [2]. While some trade agreements have seen temporary levy reductions, tensions remain, and concerns persist about the impact of tariffs on consumer prices, as highlighted by walmart’s finance chief [2].

expert reactions and market resilience

Despite the downgrade, some analysts, like those at barclays, believe it may not significantly alter congressional actions or trigger a mass sell-off of u.s. treasuries [4]. They point out that previous downgrades, such as s&p’s in 2011, had limited long-term impact [4]. However, others view the downgrade as a critical signal. peter boockvar of bleakley financial group sees it as an indication of the strained debt and deficit situation in the u.s. [4][6]. the u.s. national debt exceeded $36 trillion in january 2025, raising concerns about long-term fiscal sustainability [7].

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