Following the more than 500 point drop on the DOW on Thursday, rating agency Standard & Poor’s gave the market another shock by downgrading US debt to AA+ with a negative outlook on Friday after markets closed. The other major rating agencies, Moody’s and Fitch, maintained the AAA rating.
The downgrading was not totally unexpected as S&P has warned about the downgrading 4 months ago. Although the timing may not be ideal following the 500 points slide the day before, S&P has given the markets 2 full days over the weekend to digest this piece of news and not have a knee-jerk reaction . Already, countries like Japan and Russia has voiced continued support for US Treasuries. Ironically, they do have little choice as there are no other market close to the size or offers similar liquidity as that of the US Treasuries.
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