The US had been under ‘negative watch’ from Moody’s for 18 months before the downgrade, meaning it was not unexpected. Importantly, Moody’s continues to highlight the “exceptional credit strengths” in US, including “the size, resilience and dynamism of its economy and the role of the US dollar as the global reserve currency.”
Despite recent volatility and concerns over the US fiscal position, US Treasuries remain a reliable safe-haven asset, according to Rick Patel, portfolio manager at Fidelity International.
Market participants have been unsettled by geopolitical tensions and trade-related news, alongside the recent US credit downgrade by Moody’s and concerns about the size of the US fiscal deficit. However, Patel maintains that these fears are overstated.
