Recently, Fitch Ratings downgraded the U.S., a decision that is making headlines in financial circles around the world. Understandably, such news might lead to concern about the stability of your investments and the future economic landscape. We'd like to take a moment to address these concerns and assure you that, while we're vigilant in monitoring this development, it's not currently leading to any major shifts in our investment strategy.
Understanding the Downgrade
To fully grasp this issue, it's important to look at the reasons behind the downgrade. As reported by Reuters, Richard Francis, a senior director at Fitch Ratings, highlighted the U.S.'s deteriorating governance as a factor, particularly citing the insurrection events and the ongoing polarization in politics. This polarization, according to Francis, has seen the middle ground fall apart as Democrats move further left and Republicans further right.
Moreover, Fitch highlighted the steady decline in governance standards over the last 20 years, especially in fiscal and debt matters. Interestingly, Fitch chose this moment for the downgrade, a time when markets are relatively calm and the U.S. is not in a recession. It is likely they chose this timing to avoid causing excessive market volatility.
It is worth noting that this is the second downgrade in U.S. history, and given the continuing debt increase, it's conceivable there may be more in the future.
Repercussions and Our Position
While these are significant points, we would like to assure you that we're not expecting any lasting, disruptive impact on the U.S. economy or markets from this downgrade. Rather, we're hopeful that this could serve as a wake-up call to the government, urging them to reconsider their spending habits and to stem the rapid rise in debt. In the interim, the dollar is still the most coveted currency, and US Treasury debt is still the bedrock of the global financial system and world’s reserve currency. This does not appear to be changing any time in the foreseeable future.
As for our investment strategy, we continue to hold a defensive stance, prioritizing risk management and stability over chasing short-term gains. This prudent approach serves to insulate our portfolios from the kind of shocks that can be triggered by news like a rating downgrade.
Looking Ahead
While we acknowledge the downgrade, it's critical to remember that the global financial system's resilience has weathered more significant challenges. We see this as an opportunity to reinforce the importance of prudent fiscal management and to use it as a lever to press for sensible government policies.
For now, the key message is not to rush into major changes to your investment strategy. We believe in the robustness of our approach and the strength of the markets to absorb such events.
As always, we continue to monitor the situation closely, ready to adjust as needed to safeguard your interests and align with your financial goals.
Provista Wealth Advisors in Greenville, SC, provides peace of mind through personalized asset management, expert estate planning, and retirement planning. Navigate your financial journey with confidence. Rest Assured, We Have A Plan. Give us a call at (864) 696-2410 or send us a message to schedule your free introduction meeting.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Commentary is not intended to be forward looking and should not be viewed as an indication of future results.