Recently, Standard & Poor’s downgraded the U.S. economy from AAA to a rating of AA+, throwing Wall Street into a tizzy—along with plenty of confused Americans outside of the financial industry. So what exactly does this downgrade mean for the country, and, more importantly, for you? Here’s a quick breakdown of the facts to help you avoid a nervous one…
Just like you, the U.S. has a credit score. Based on the recent debt ceiling deal, the credit rating agency Standard & Poor’s claims to have less confidence in the nation’s ability to repay its debt and as a result downgraded its rating from AAA to AA+.
Standard & Poor’s isn’t the only credit rating agency out there. Two others, Moody’s and Fitch, have retained the nation’s AAA rating.
The U.S. isn’t the only nation struggling with debt. When our credit rating was downgraded, the market tanked. But many countries in the world are experiencing difficult economic times right now, including several in Europe that are also facing debt crises. The stock market reacts to the instability of the global economy, not just ours.
Financial experts recommend thinking long term rather than panicking. In other words, don’t pull your money out of the bank and stash it under your mattress. The market for U.S. Treasury bonds is still strong, as are many other long-term investments.
In a nutshell: While no one knows exactly what will happen with the economy or the market in the near future, those in the know advise riding out the storm.