Egan-Jones Cuts U.S. Credit Rating From “AA” to “AA-,” Is Moody’s Next?
Egan-Jones has downgraded America. The ratings firm lowered the credit rating on the U.S. government to “AA-” from “AA,” and stated quantitative easing from the U.S. central bank would hurt the economy. Egan-Jones claimed the new $40 billion in spending each month by the Federal Reserve would lower the U.S. credit quality and won’t help the gross domestic product while lowering the value of the dollar. Stocks continued to rally today after the Ben Bernanke unveiled the new QE3 bond-buying program from the Fed yesterday but equities ended with slightly lower momentum after the announcement from Egan-Jones. The lower rating had little impact compared to the S&P downgrade in August 2011 and was issued roughly 24 hours after the Fed made its announcement of QE3.
Is Moody’s Next?
Moody’s may be the next firm to lower the U.S. credit rating and made an announcement that it was possible this week. The ratings decreases are occurring right before an election and similar to the move by Ben Bernanke and the Fed, some are raising questions about the political motivation behind the downgrade as well as the QE3 program. We were bullish mid-week and we are waiting to see more reaction from the Egan-Jones downgrade -if any. Another downgrade from Moody’s could cause the Fed to go back to the drawing board and recalibrate if markets look ready to become risk averse which the Fed is adamant about stopping in the current slow economic environment.
