Yes they brought down the credit rating but they also changed it from negative to stable.
**Moody’s Ratings (Moody’s) has downgraded the Government of United States of America’s (US) long-term issuer and senior unsecured ratings to Aa1 from Aaa and changed the outlook to stable from negative.
This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.**
Was that little tid bit about going from “negative” to “stable” mentioned in any of last week’s easily accessible stories about the downgrade? Saying the quiet thing quiet. Maybe that’s why the market blew it off as meaningless or perhaps even a slight positive
Seems that “outlook” shift is routine. Seems a “negative” outlook is issued when the agency isn’t sure it’s current rating is really justified, vs a lower rating. Then, when they issue the downgrade, they change to “stable”, implicitly saying “this is the rating we have been thinking was justified for a while”.
Meanwhile, I watched a documentary, decades ago, that demonstrated how an (intended word is apparently banned, so “biological thing capable of learning”) responds to a stimulus. The first time the stimulus is created, the (thing) produces a significant response. The second time, the response to the same stimulus is less. The third time, the (thing), has become acclimated and there is little to no response. We will see how the market responds tomorrow.
Just this tidbit, to add some historical background. IIRC, there was a lot of hand ringing in 2011. And some histeria about Fitch in 2023. Those were followed up with “kick the can down the road” by our L&Ss.
Gemini AI: AI Overview
The three major credit rating agencies have all downgraded the United States’ debt rating. Standard & Poor’s was the first to downgrade the U.S. in 2011, followed by Fitch Ratings in 2023, and most recently, Moody’s on May 16, 2025.
Downgraded the U.S. on May 16, 2025, citing rising debt and interest payment ratios, which are significantly higher than those of similarly rated sovereigns.
As Steve stated, that is normal and expected. In a normal world, we get a negative outlook before a downgrade, then stable. That way, fewer are caught unaware when a downgrade occurs - since they have been telling you that it likely was coming with the negative outlook.
I can accept that Hawkwin but the media did not explain that there was 21 levels and we were now at 20 stable. It would be like having an A+ in school and then getting an A. The media was acting like it was a D or F.
Well, it is still a significant event. We went 100+ years with a perfect score and in just the last few years, have lost it with all three agencies. This means that any bond fund that invests in only AAA rated debt likely has to remove all government bonds (if they had not already done so). That is a big deal. Heck, Johnson and Johnson now has higher rated debt that the US government. That is a big deal.
This isn’t like comparing the downgrade to a letter grade. You can still graduate and go on to have a successful career with a C or D average. If the US debt came anywhere close to even BBB, we would likely be headed to default without massive draconian measures to change course (and probably prior).
