In a not-so-surprising move, the rating agency Moody’s has downgraded the credit quality of the U.S. to AA1 from AAA. This recent action reflects the ever-growing concern over America’s budget deficits and exploding debt. With a national debt approaching $37 trillion due to years of excessive spending, some believe the financial strength of the U.S. is weakening. As you continue reading, it should become clearer why Moody’s has taken this action. A country’s debt is often measured against its economic growth or GDP. This is called the debt-to-GDP ratio, which for the U.S. was 35.39% in 1980, 57.11% in 1990,…

While stocks managed to bounce back from early losses the first day after Moody’s downgrade of U.S. sovereign credit—bringing it in line with previous actions by Standard & Poor’s (2011) and Fitch (2023)—we understand that the decision raises concern about America’s fiscal health. But as history has shown, these downgrades have hardly been lasting impediments to long-term equity market gains. For investors with a steady hand and a long-term perspective, the evidence continues to favor staying the course. The rationale from Moody’s echoed familiar concerns: persistent large fiscal deficits, rising entitlement spending and limited political will to rein in debt.…