S&P's Negative Outlook of U.S. surprise, possible, outlook, change, future

busprof

Why is this a surprise to the market?

It's pretty much a given that this change of outlook and possible future downgrade of the AAA status will come sooner or later.

Thoughts?

cfa10yrplan

The market made a run on sentiments. To put it in simple words, people just wanted to recover all of their losses, and hence drove the market emotionally. Fundamentals haven't materially improved from where we were in 2008. Billions still need to be accounted for.

I guess the shock comes from the fact that consumers had emotionally started to recover. There should be some correction in our markets coming soon. Don't believe the oil prices, at least not yet.

random_walker47

If anything i thought this would be bullish. S&P has lost all credit with the investment community, and this this report was merely a blinding glimpse of the obvious, but it will resonate with politicians. It isnt new news, but its a growing confirmation for policymakers that they are failing

grharmeyer

^agree. now it's on politicians to appear credible in their fiscal planning. I'm actually surprised at how quickly Congress has reacted thus far. The timing of the election had something to do with it, but both sides are now talking about reductions which is at least a first step.

The really hard decisions are still yet to be made though.

Related question: it seems the market has a relatively tame outlook on treasury rates going forward and credit spreads have come in dramatically. Is the market wrong and everyone buying debt at historically average spreads is going to get burned by sharply rising treasuries?

laurab

I think the relatively tame outlook on Treasuries is a reflection of turmoil in the Middle East and the expectiations that Greece and/or Ireland will default. Remember that a flight to safety for those countries means only one thing - buy Treasuries.