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Unfortunately this implied "downgrade = stock plunge" association seems to be everywhere this morning with no mention that long term interest rates for US debt
by ajg1977 15y ago
Unfortunately this implied "downgrade = stock plunge" association seems to be everywhere this morning with no mention that long term interest rates for US debt have actually dropped.
Depending on the source it's probably down to ignorance, lazy re-reporting or blind economic ideology, but if you believe that cutting government spending and services during a recession/recovery is a bad idea then it's a scary thing to see.
- bdonlan 15y agoWouldn't a downgrade be expected to result in an interest rate _increase_, due to higher risk?
- hugh3 15y agoYou'd think so, wouldn't you? On the other hand, where else are you gonna put your money?
- _delirium 15y agoIn this case I'm not too surprised at the lack of change, mostly because unlike with a little-known corporate bond or an inscrutable country nobody has info on, the S&P ratings don't really add new information that any economic analyst didn't already know about U.S. Treasury bonds. So, assuming anything remotely approaching an efficient market, any information S&P based its ratings decision on should've already been priced into the bond prices, because it was information everyone else has also had for a while now.
- hugh3 15y agoUnfortunately this implied "downgrade = stock plunge" association seems to be everywhere this morning with no mention that long term interest rates for US debt have actually dropped. Well, if everyone believes that downgrade --> stock plunge, or even if a sufficient number of people believe that downgrade --> stock plunge, then it's no surprise that downgrade --> stock plunge. I think the smart money will be hunting bargains. Pity I don't have any right now.