US Credit Downgrade: What It Means for the Market and Where to Invest
Moody’s recently lowered the United States’ sovereign credit rating from AAA to AA1, raising red flags over mounting fiscal deficits and rising interest burdens. This marks a historic shift—it’s the first time since 1917 that Moody’s has removed the U.S. from its top-tier status, following earlier downgrades by S&P in 2011 and Fitch in 2023.
Market Reaction: A Slight Stumble
Following the downgrade, U.S. stock futures experienced a decline, with the S&P 500 and Nasdaq futures dropping by approximately 1.1% and 1.3%, respectively. The U.S. dollar also weakened, while Treasury yields rose, reflecting investor concerns over the nation's fiscal trajectory. However, the market response was more tempered compared to previous downgrades, suggesting that investors had partially anticipated the move.
Historical Context: Resilience Amid Downgrades
Historically, credit rating downgrades have led to short-term market volatility but have not derailed long-term growth trends. For instance, after the S&P downgrade in 2011, the S&P 500 index dropped over 10% but rebounded with a 36% gain within a year.
Investment Perspective: Opportunities Amidst Volatility
While downgrades is a minor setback, it remains highly rated, hence we view these opportunities for discerning investors to buy on weakness. Focusing on fundamentally strong large-cap stocks can position investors to capitalize on potential market rebounds and long-term growth trajectories. We remain positive on the outlook of US markets
Top U.S. Large-Cap Stocks to Consider
In light of the current market conditions, traders may consider the following U.S. large-cap stocks, known for their robust fundamentals and resilience:
- Apple Inc. (AAPL): A leader in consumer electronics with a strong ecosystem and consistent revenue growth.
- Microsoft Corporation (MSFT): Dominant in enterprise software and cloud computing services, offering stable earnings.
- Alphabet Inc. (GOOGL): Parent company of Google, with diversified interests in search, advertising, and emerging technologies.
- Amazon.com Inc. (AMZN): E-commerce giant with expanding ventures in cloud computing and logistics.
- NVIDIA Corporation (NVDA): Leading designer of GPUs, benefiting from growth in AI and data center markets.
These companies possess strong balance sheets and have demonstrated the ability to navigate economic uncertainties, making them potential candidates for investors seeking stability and long-term growth.
Final Take
While the U.S. credit downgrade is minor setback it remains highly rated, and it also presents opportunities for discerning investors. Rakuten Trade’s new brokerage fees— the most lowest* in Malaysia—clients can trade smarter and more cost-effectively.
Looking to take a more consistent, long-term approach? Explore Raku-Invest, our automated U.S. stock investment feature designed for those who want to build wealth gradually with minimal effort.
Start your investing journey with us today—open an account effortlessly by clicking the link below:
