What happens because of this new downgrade? We do feel the markets will react less than they did 12 years ago, in part because subsequent events usually produce more muted results than original ones (think about the banking crisis of March). And even though these downgrades were 12 years apart, we think that still holds true.

John R. Mousseau - In the News


We still have dysfunctional government and will probably have it for a while until the pendulum swings back to more cooperation between parties. And we do have plenty of issues in front of us. Most immediately, for the U.S. Treasury, is a lot of upcoming issuance, the majority of which is refinancing of debt rolling over, but there will be some new money debt as well.

There is no question that markets have increased perceived risk through credit default swaps on U.S. debt. But even after retreating, credit default swaps are still twice as high as they were at the end of 2021. This is a caution sign. My colleague David Kotok wrote about this last week: cumber.com/market-commentary/cost-debt-ceiling-crisis.

In other words, the Fitch downgrade maybe harbors a refocus on the continued deficits as well as the fiscal policy producing them. As of Aug. 4, the 10-year U.S. Treasury bond is up 14 basis points in yield and the 5-year bond is unchanged. But the roller-coaster week in yields certainly reinforced the dysfunction in our government.


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.


Sign up for our FREE Cumberland Market Commentaries

Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.

John R. Mousseau
Published Date
News Source
Sarasota Herald Tribune