Last Friday, the USA faced another shock, but this time it was not related to Trump; rather, the three major credit rating Institutions, Moody's, downgraded the USA's sovereign credit rating from 'AAA' to 'Aa1'. After this downgrade, the USA has been lowered below the highest rating of AAA by all three rating Institutions. Following Moody's announcement of the downgrade, major U.S. stock index Futures $Nasdaq Composite Index (.IXIC.US)$ $Dow Jones Industrial Average (.DJI.US)$ immediately fell, and government bond yields rose.
How serious is this matter? The market has different views. In fact, as early as 2011, the U.S. debt rating was also downgraded; during that downgrade period, U.S. stocks experienced significant sell-offs, and the S&P 500 Index ETF $SPDR S&P 500 ETF (SPY.US)$ fell nearly 10%. Coincidentally, U.S. stocks have been rising very strongly during this period, and this downgrade by Moody's may provide an opportunity for the stock market to pull back and cool down.
However, some market participants believe that this rating downgrade will not cause panic as before because the panic in 2011 mainly stemmed from the possibility that US government bonds would no longer qualify as eligible collateral, forcing institutions to sell off. The system has since been adjusted, and rating changes will no longer trigger forced sell-offs. In any case, the impact will be clear when the market opens on Monday. Moody's is a USA company, yet it behaves this way; Americans like to shoot themselves in the foot. The US stock market may be turbulent, for now, attention is more on the Hong Kong market.