credit-reporting agency Standard & Poor’s downgraded the U.S. “AAA” credit rating from “stable” to “negative.” It was one big, loud message: if the U.S doesn’t get spending under control, its credit rating will be jeopardized further.
So how did the markets react? They gave us the opposite of what is expected. Instead of the U.S. dollar falling in value, it rallied. Bond prices, instead of declining, rallied. And gold stock prices declined with crude oil prices.
Why would U.S.-dollar denominated assets rally on the news of a U.S. credit rating cut (aside from trying to confuse the heck out of investors)? The reality of the situation is that investors still foolishly flock to U.S. dollars in times of uncertainty—even when the debt rating of the country issuing the dollars, the U.S., has been downgraded.
http://wallstreetpit.com/71669-downgrading-of-u-s-credit-rating-just-tip-of-the-iceberg
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