Ratings agency Fitch recently downgraded its rating on U.S. debt from AAA to AA+, which came as a surprise to many across the industry. Yahoo Finance spoke to analysts and experts to get their reactions and determine the potential impact of the downgrade.
Allianz Chief Economic Advisor Mohamed El-Erian said that the downgrade was "surprising." El-Erian added, "Why now? You scratch your head as to the timing of this."
Laffer Tengler Investments CEO and Chief Investment Officer Nancy Tengler gave her opinion on the downgrade. Tengler said, "Fitch's downgrade matters only because it drew attention to the fact that the government is sucking capital out of the private sector in an unprecedented manner."
American Action Forum President Douglas Holtz-Eakin broke down the impact of the downgrade. Holtz-Eakin said, "This isn't news. This has been true for awhile. And the fact that we continue to not deal with it is at the heart of the downgrade."
Intel CEO Pat Gelsinger provided his opinion on the downgrade. Gelsinger said, "I view it more as a statement, hey, get our debt situation under control."
State Street Global Advisors U.S. SPDR Business Chief Investment Strategist Michael Arone was not "all that suprised." Arone said, "I'm not all that surprised. I think the biggest thing is that the market hasn't really reacted to all this so far.
Allianz Chief Economist Ludovic Subran discussed the potential impact of the downgrade on the services sector. Subran said, "As long as people believe that the U.S. treasury is doing their job ... the U.S. treasury is a safe asset."
Video highlights:
00:00:03 - Allianz Chief Economic Advisor Mohamed El-Erian
00:00:15 - Laffer Tengler Investments CEO and Chief Investment Officer Nancy Tengler
00:00:28 - American Action Forum President Douglas Holtz-Eakin
00:00:41 - Intel CEO Pat Gelsinger
00:00:52 - State Street Global Advisors U.S. SPDR Business Chief Investment Strategist Michael Arone
00:01:10 - Allianz Chief Economist Ludovic Subran
Video Transcript
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MOHAMED EL-ARIAN: What Fitch put in their statement has been true for a while, so why now? You scratch your head as to the timing of this.
NANCY TENGLER: Fitch's downgrade matters only because it drew attention to the fact that the government is sucking capital out of the private sector in a-- I don't know-- an unprecedented manner in my career of 40 years.
DOUGLAS HOLTZ-EAKIN: The US has a seriously unsustainable fiscal outlook and this isn't news. This has been true for a while. And the fact that we continue to not deal with it, I think, is at the heart of the downgrade. The US has a very big problem.
PAT GELSINGER: OK, there you go. You know, it's a downgrade. Hey, there may be some implications or cost of debt, but I really see that as somewhat minor. You know, I view it more as a statement, hey, get our debt situation under control.
MICHAEL ARONE: And I think what they're basically acknowledging is before the ink was even dry on the debt ceiling resolution, a small faction of Republicans were already questioning the deal and threatening to hold up some of the budget requirements for later this year. And I'm not all that surprised. I think the biggest thing is that the market hasn't really reacted all that much to this so far.
LUDOVIC SUBRAN: Look, I think as long as people believe that the US Treasury is doing their job, of course, the past, you know, few months have been a bit weird with this idea of the Republican Party even calling for an organized default, right? But I think every saver sees that the US treasuries is a safe asset.
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