The last time the US debt was downgraded by another major credit rating agency, S&P, came in 2011. In both cases, the limit was raised only after protracted negotiations.
The last downgrade happened on a Friday afternoon, so investors had a weekend to think about their next move. It didn’t help.
On the first trading day after the downgrade the S&P 500 plummeted by 6.5%. Markets had their most volatile week since the global financial meltdown in 2008, and it took another six months for stocks to climb back up to their previous highs.
Until 2011, US debt had carried a perfect credit rating since Moody’s Investors Service first assigned the United States a AAA rating in 1917. The country’s new Fitch rating puts it on par with Austria and Finland but below Switzerland and Germany.
S&P has maintained its AA+ rating on the US after the 2011 downgrade while Moody’s has kept its AAA rating.
