Monthly Archives: August 2023

Fitch Ratings Downgrades the US Long-Term Debt: What That Means & How You Are Impacted

Planning Article

August 2023 – By Ryan Boyle CFP®

On August 1st, 2023, Fitch Ratings downgraded long-term US Debt Issuer Default Rating from AAA to AA+, citing concerns with political issues, a slowing economy, and several other factors for their decision. Although bipartisan efforts were made to suspend the debt ceiling to 2025, the fact that the U.S. would have defaulted had this last-minute agreement not been reached marks only one of the few factors in Fitch Ratings’ decision to issue the downgrade.  Along with the last-minute decision to raise the debt ceiling, Fitch Ratings has expressed concerns revolving around the progress made towards Social Security and Medicare given the aging population (FitchRatings).  Like most other larger financial institutions, Fitch is also projecting a mild recession towards the end of 2023, possibly early 2024.  Their projection on the economic slowdown did impact the decision to lower their rating, but the main drivers to the downgrade were tied to the U.S. debt repayments and issues that could impact how their debt is paid.

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Between a Rock and a Hard Place

Market Memo

August 2023 – By Kyle Rohrwasser

A little history before we jump in, many people use this saying in their everyday lives, but many don’t know the origin. It was the actual origin of the idiom that comes from Homer’s Odyssey. In Homer’s Odyssey, Odysseus must pass between Charybdis, a treacherous whirlpool, and Scylla, a horrid man-eating, cliff-dwelling monster.

Although not a monster, the Fed has found itself in a situation that has one long-term solution but the timing of it will be tricky. As stated in many previous articles, the Federal Reserve has raised rates dramatically over the last year and a half, moving from 0% to 5.25%. This was done in the face of record-breaking inflation over the last 40 years, hoping the economy would slow and drive prices down. We have seen inflation fall from a 9% high in June of last year to a 3% month-end July of 2023, still short of the Fed’s 2% goal. Everything leads to lower rates eventually, but the question is, can the Fed time it correctly?

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