Stock Market Reactions to Past Downgrades

To help us evaluate and understand the implications of current events we find it helpful to look at past market behavior.  With Standard & Poor’s downgrade of the U.S. debt rating from AAA to AA+ we were interested in learning how other markets fared after a downgrade to their credit worthiness. 

Interestingly, there have been 11 downgrades of sovereign country debt ratings over the past 25 years.  In 8 of those 11 cases, the stock markets of the affected countries were higher 12 months after the downgrade occurred, and the average stock market increase was 17%.

Source:  BlackRock, Inc.

Evansville Courier & Press Article

"But there's more to it than just riding it out. That's incomplete and overused," said Taylor Payne - read the full article here Evansville Courier & Press Article

Drop in the Bucket

Once again at the eleventh hour, Republican and Democratic leaders found enough common ground to avert complete gridlock past a tight deadline as they passed a bill that would allow the debt ceiling to continue to climb.  The bill promises spending cuts of $2.4 Trillion over ten years, equaling the debt ceiling increase (the debt ceiling will rise in three steps).