In breaking financial news, Fitch has downgraded their U.S. credit rating from AAA to AA+. The only other time that the U.S. has been cut from its highest AAA rating was by S&P in 2011, which attributed budget standoff issues and a prolonged fight over the government's borrowing limit as determining factors. Following this, the Government Accountability Office released a 2012 report that estimated that those standoffs raised the Treasury's borrowing costs by $1.3 billion that year.
Looking at the most recent rating adjustment from Fitch and their report of driving factors, current considerations are reminiscent of those from the S&P demotion as "repeated debt limit standoffs and last-minute resolutions" were driving factors of Fitch's rating score.
After Fitch's public announcement yesterday, mixed responses have flooded the finance world. While the Secretary of the Treasury, Janet Yellen, outright disagrees with what she calls an "arbitrary" and "outdated" rating system, others such as Treasury spokesperson, Lily Adams, claim that the demotion is indicative of the larger need for "swift bipartisan action" on Congress's behalf to avoid economic crisis.
As this news makes its way into your inboxes and onto your newsfeeds, we want to remind you that we are here to support you during these turbulent times. We invite you to reach out to your FSR at (888) 543-3776 who can help provide strategies to reduce the risks associated with higher future tax rates and stock market volatility as the U.S. continues to lead the charge in public debt as a percentage of GDP.
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