In recent weeks, major credit rating agencies have expressed renewed concern over the fiscal outlook for the U.S. government, even raising the possibility that it could eventually lose its AAA rating. What are the implications for investors? There’s both a short- and a long-term dimension to this question. In the near-term, the Treasury estimates that if its statutory borrowing limit is not soon raised by Congress, it could default on interest and debt repayments by August. This risk is still viewed as remote, but if it did occur, it could cause significant dislocation in markets, and a credit rating downgrade would be justified. Additionally, rating agencies worry that the U.S. government is on an unsustainable long-term fiscal path. Does any of this lead us to believe that investors should not own U.S. government debt?
Read the full report from SEI How Would a Credit Downgrade Affect Investors?