It is not even a few weeks ago that the US lost its pristine AAA credit rating by the S&P for the first time since 1917. This nerve-wracking financial move came just a week after the gridlocked Congress agreed to some spending cuts that would drop down the national debt by at least $2 trillion, a riotous process that naturally contributed to all the convulsions within the various financial markets. As the promised cuts weren’t enough to satisfy the ace credit rating agency Standard & Poor’s, they stripped off America of its sterling credit rating. Just as the US federal government has borrowed more than what it should have, the consumers are also struggling with their soaring debt obligations and the debt management firms are gaining momentum. Though such debt relief companies are trying their best to assist people in getting out of debt, there is not much that can be done to curb the spiraling consumer credit card debt problem in the US.
History suggests that when S&P issues a negative outlook about a particular economy or a nation, it takes at least 2 years to issue the final downgrade but this is perhaps the first time when S&P has downgraded the pristine credit rating within 22 days and this speed with which it downgraded the credit rating of the US has left the consumers and the investors awestruck. Moreover, financial experts are of the opinion that the US investors must also be aware of yet another downgrade as this is a near possibility.
Valuable tips for the wary investors – Are their profits at stake?
The US investors rose up to a nasty surprise and as the stock markets tumbled with the S&P’s decision to reduce the AAA credit rating to AA+; you might be wondering how this move will affect the already-nervous investors. Though the downgrade was not a surprise, investors are expecting some selling when the stock trading resumes. Have a look at some valuable investment tips that you must consider to stay sure about your returns.
- Brace for increase in the interest rate: With the downgrade in the credit rating, the US debt is becoming more and more risky and thus lenders and creditors are charging outrageously high interest rates on personal loans, mortgage loans and even on auto loans. A direct increase in the home loan payments without an increase in your salary might take a toll on your personal finances.
- Excessive stock investment may be harmful: If you’ve already invested too much on stocks, then this is the perfect time to shuffle your investment portfolio and balance it to avert the risk of huge losses. An eminent financial expert is of the opinion that a worthy investor must always subtract his age from 100 in order to determine the percentage of money that must be invested in stocks.
- Diversify your portfolio: If you’ve already created an investment portfolio, make sure you diversify your portfolio so that all your assets perform well within the market. Choose multiple investments in multiple companies only after checking the performance of that particular firm for the last few years.
A chief investment officer of a private bank has reportedly said that though there will be losses in various financial markets, they’ll be short-lived. The biggest fear within the US market is that this decision would scare buyers away from the US debt. If this were to happen, the interest rate paid on US bonds, notes would rise, thereby raising the borrowing costs of all consumers. However, to everyone’s surprise, though the stock prices were plunging, the investors kept on buying Treasurys and this pushed up their prices.