‘Sell America’ is back on after a massive debt warning

Wall Street is on edge about American investments again after receiving a significant warning about the safest of all safe havens: US debt.

Wall Street is on edge about American investments again after receiving a significant warning about the safest of all safe havens: US debt. Moody’s downgraded America’s debt on Friday evening from its previously perfect AAA credit rating, the last of the three major credit rating agencies to strip US Treasuries of their flawless reputation. Explaining its rationale for lowering its credit rating on the United States for the first time since 1917, Moody’s cited ballooning US debt levels and Washington’s intransigence over budget deficit solutions. US stock futures fell sharply. Dow futures fell 350 points, or 0.8%. The broader S&P 500 futures were down 1%, and Nasdaq futures were 1.4% lower. Investors sold off US Treasuries. The benchmark 10-year yield, which trades in opposite direction to its price, rose to 4.5%. Meanwhile, gold, a traditional safe-haven, rose 1.4% to $3,232 a troy ounce. Investors in American assets have been on a roller coaster ride this year. Initial excitement over President Donald Trump’s business-friendly and tax-cut policies sent stocks surging to a record high in mid-February. But that fervor soon gave way to extreme fear over Trump’s trade policy, sending investors pouring out of American assets in what market observers called the “sell America” trade. That sent bonds and the dollar tumbling and stocks an inch away from a bear market in April. In mid-April, however, a pause in trade tensions renewed faith in American investments and sent stocks and bonds surging again. But then came Friday’s debt downgrade.