S&P, one of three major credit rating institutions, downgraded the U.S. credit rating from AAA (highest possible) to AA+ (second highest) in August 2011. This could affect foreign investments in the U.S. and the nation's ability to borrow money, which could in turn impact the world economy and financial markets.
- According to the financial theories that you have encountered thus far, what impacts should the U.S. credit downgrade have on stock and bond values?
- What, if any, have been the immediate impacts of the 2011 U.S. credit rating downgrade on stock and bond values?
- What, if any, do you think will be the long-term impacts of the 2011 U.S. credit rating downgrade on stock and bond values?