Advisors take US debt downgrade in stride: ‘More to do with politics than economic stability’
Financial advisors weren’t expecting a credit rating agency to downgrade U.S. debt two months after the country avoided a default, but they’re taking the move in stride.
Late Tuesday afternoon, Fitch Ratings demoted U.S. bonds from ‘AAA’ to ‘AA+,’ citing “expected fiscal deterioration” in coming years, the country’s “growing … debt burden,” and the “erosion of governance.”
The last point relates to Congress and the White House agreeing at the last moment to raise the debt ceiling earlier this summer. Advisors weren’t worried then that the country would spurn its debt. Nor were they shaken up by Fitch’s decision, which came weeks after a potentially catastrophic default was averted.
“The timing is surprising, but it’s not totally unexpected,” Francisco Ayala, an advisor at The Coleridge Group, said of the downgrade. He noted that Fitch has had a negative rating watch on the United States for a while.
“This has more to do with politics than the economic stability of the U.S.,” Ayala added.
Lisa Kirchenbauer, founding partner and senior advisor at Omega Wealth Management, also was caught off guard by the Fitch announcement.
“My initial reaction last night was, ‘Wow, this is a little late,” Kirchenbauer said. “I don’t think it’s worth panicking about.”
Jeff Farrar, founding partner at Procyon Partners, also was sanguine, noting that Fitch is the second credit agency to downgrade U.S. debt.
“S&P did it 10 years ago, and we’re still stumbling on. Nothing’s gotten better,” Farrar said. “It’s not great, but it doesn’t mean the world is going to end tomorrow.”
The problems that Fitch cited regarding the brittle politics in Washington were hardly a revelation, advisors said.
“It’s not telling us anything we don’t already know
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