Move over, Greece. Make way, Ireland. The U.S. may be coming to join you.
Investors worrying over whether the political standoff in Washington will lead to an actual default might want to begin rebalancing their portfolios, according to Contango Capital Advisors CEO George Feiger. As the drop-dead date approaches in August, markets have already begun to react, causing turmoil that can affect financial holdings in a number of sectors, and Feiger suggests that for investors, the time for rebalancing may have come.
The situation is dire. With the news that Moody’s warned the U.S. that the consequences of failing to increase the debt ceiling would mean a downgrade, markets began to show their nervousness. The ratings agency put the country’s Aaa rating on review for potential downgrade on Wednesday, saying in a statement that the risk of default was thought “no longer to be de minimis.”
While it added, “If the debt limit is raised again and a default avoided, the Aaa rating would likely be confirmed,” it also said, “However, the outlook assigned at that time to the government bond rating would very likely be changed to negative at the conclusion of the review unless substantial and credible agreement is achieved on a budget that includes long-term deficit reduction.”