Fitch Ratings said Friday it has affirmed the U.S.’s credit ratings at the top-notch triple-A level, with a stable outlook. The dire economic and political landscape cited by Standard & Poor’s when it downgraded the U.S.’s AAA credit rating in 2011 is proving to be unfounded.
Since the August 2011 downgrade, record budget deficits have shrunk, economic growth accelerated, the dollar rallied, stocks climbed to all-time highs and Treasuries strengthened their hold as the world’s preferred haven from turmoil. Deficits have fallen from $1 trillion as stronger economic growth is forecast by a government agency to reduce the budget shortfall to a seven-year low as a share of gross domestic product.
The U.S. fiscal 2014 deficit will narrow to $514 billion, or 3 percent of gross domestic product, from $680 billion last year, the Congressional Budget Office said Feb. 4. The projected gap is down from 9.8 percent of GDP in 2009, the widest in records dating back to 1974, and is close to the average of the past four decades, the agency said.
Fitch said it affirmed U.S.’s long-term foreign and local currency issuer default ratings at triple-A with stable outlooks, as well as its senior unsecured foreign and local currency bonds. The country ceiling was also affirmed at triple-A, the firm said.
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Plus financial markets yawned when S&P downgraded the US … some pension funds in their by-laws are restricted to AAA rated debt, but apparently not enough to make a difference, at least when the downgrading of credit labels wasn’t across the board. And let’s not forget all the AAA-rated bonds that were toxic from the get-go. If you don’t realize it, bond issues pay agencies to attach a rating. Obviously if you’re expected to be honest and competent and label junk as junk, you lose business.
While it’s a relatively uncontroversial decision, this is a promising Macro economic sign. The downgrade of US credit by S&P was likely a blow to the confidence of investors. As an investor you wouldn’t exactly be eager to enter the market when even the most secure investment is being reevaluated. However, this confirmation of this international financial safe haven will likely help investor confidence has stock markets continue to surge and the tentative recovery continues to make its slow progress.
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