Date: 15/05/2025
*** GENERAL AVICE ONLY***
Moody’s downgrade of the U.S. credit rating from “Aaa” to “Aa1” has immediate and longer-term implications for U.S. stocks. In the short term, the announcement triggered a decline in major stock indexes and a rise in Treasury yields, with the S&P 500 and related ETFs dropping about 1% in after-hours trading following the news
However, many experts believe the downgrade’s impact on equities will likely be limited and short-lived, especially since Moody’s is the last of the three major agencies to act, and markets had already priced in much of the fiscal risk.
Historical precedent supports this view: after previous downgrades by S&P in 2011 and Fitch in 2023, the S&P 500 initially fell by about 10% over several weeks but rebounded strongly within a year, posting gains of over 35% in both cases. This suggests that while sentiment-driven selloffs may occur, U.S. equities have historically recovered as long as economic fundamentals and corporate earnings remain solid.
Trade Rationale
The negative catalyst at over extended levels in a Bear market Rally give us an oppotunity to hedge with a risk/reward ratio of clos to 5:1 which is a smart trade to take
Trade Strategy:
Buy: <$4.10
Stop Loss $3.50 -12%
Initial profit target $5.10 +25%
Profit Target: $6.10 +48%
Disclaimer: The recommendation given is general advice only. It does not take into account your personal objectives, financial situation, or specific needs. This information should not be your sole resource when making such decisions. We strongly recommend you to seek the advice of financial, taxation, and legal professionals before finalising any investment decisions.