Standard & Poor’s downgraded Treasury securities on Friday – one notch down, from AAA to AA+. The other two rating agencies have left the US at AAA – for the time being. S&P says the downgrade is a result of the messy political process involved in raising the debt ceiling and its puny reduction in debt.
At first blush, it looks like Treasury bonds have more or less shrugged off the downgrade – their prices and yields have not moved much. However, the stock market has reacted to the downside – with the Dow Industrials off about 200 at the open on Monday.
Our advice at this point is to stick with your long term, diversified investment portfolio. Trying to time events and times such as these is very difficult. Significant selling now typically locks in losses and makes investors reluctant to re-enter right before markets begin up-legs.
Think of it this way – with what happened last week and early today – good stocks are on sale. We all like finding good items on sale. That’s what is going on with stocks right now.
In short, we do not expect a double-dip recession, nor some prolonged bear market.
If you have any questions or would like some additional help with your portfolio, please give us a call.