What experts are saying about S&P downgrade of U.S. credit rating
As the markets digest Standard & Poor's decision to downgrade the United States' credit rating, financial analysts are giving their expert read on the news. Here is a sampling of the views circulating:
Brown Brothers Harriman:
Ultimately, we suspect, and expect many investors, to conclude that S&P’s decision was as much about marketing and politics as the fiscal facts. We recognize that among the class of professional investors, the ratings agencies have lost a great amount of credibility. They are seeking to rehabilitate their reputations for their business-related reasons as well as to attempt to head-off official actions that would diminish their influence and/or spheres of operations.
Frederick Cannon, Keefe, Bruyette & Woods:
The S&P downgrade of U.S. long-term debt will have limited direct impacts on financial markets and financial firms, in our view. Neither bank nor life insurance risk weightings will be impacted, and money funds are driven by short-term, not long-term, ratings ... What the U.S. economy lacks is consumer and business confidence. Sadly, the debt downgrade, along with the debt ceiling debate have only reduced confidence further. As a result, the likelihood of continued economic softness has increased.
Richard Bove, Rochdale Research:
The “Great Debt Debate” in Congress indicates that the nation is finally coming to the understanding that the nation has a massive financial problem. Moreover, it pointed out that there is no apparent solution to this problem. This suggests that investors remain cautious until some solutions begin to emerge. The debt problem is not one our grandchildren must live with it is our problem the so-called "can" has reached the end of the road. The issue can no longer be ignored.
Vince Farrell, Ticonderoga Securities:
I don't think the markets are worried about the US's ability to pay its debts. The US Treasury market will still be a haven of safety. The markets are being jarred by the obvious lack of growth in the U.S. and by the terrifying lack of confidence in our institutions. . . So be cautious, but have faith that balance sheet strength, dividend paying capability and sound, calm management will prevail. These guys in Washington turn over often enough that we can outlast them.
Don Hays, Hays Advisory:
The bottom line is that this is "hard hat" time, a time when Investors have to temporarily hunker down and resist the panic of the Herd. It is a personality trait that all good investors learn over the years, but it never gets much easier it seems. Every time there is a new threat trying to knock over those valuable disciplines of the past. But history tells us to stay the course, and continue to rely on the instrument panel. These storms do die down, and your patience and fortitude will be rewarded.
Photo: Traders work on the floor of the New York Stock Exchange in New York on Monday. U.S. stock futures retreated, following the biggest weekly drop in the Standard & Poor's 500 Index since 2008, amid concern that a downgrade of the nation's credit rating by S&P may worsen an economic slowdown. Credit: Scott Eells / Bloomberg