Moody's Had An Investment Grade Rating On US Debt During 2008 Global Financial Crisis: Recent Cut 'Not A Huge Shock,' Says Expert

After Moody’s Ratings recently downgraded the United States’ long-term credit rating, this expert has highlighted that the rating agency had an investment grade rating on the U.S. debt even ahead of the 2008 global financial crisis.

What Happened: Moody’s recently changed its rating from Aaa to Aa1 and shifted its outlook from “negative” to “stable.” This decision means the U.S. has now lost its top-tier “triple-A” rating from all three major credit agencies, following similar downgrades by Fitch and S&P Global.

However, experts like Ryan Detrick, from Carson Research, offer a perspective of measured reaction. In a post on X, Detrick pointed out that Moody’s downgrade is not unprecedented, as other agencies have already taken similar action.

He also highlighted a historical context, noting, “Also, don’t forget the day Lehman went under (9/15/08), Moody’s had it rated A2.”

This suggests that even leading credit rating agencies can maintain relatively high ratings on entities shortly before significant financial distress. Detrick concluded that the recent downgrade by Moody’s should “not [be] a huge shock” given these factors.

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Why It Matters: The agency cited a sustained increase in government debt and interest payment ratios over the past decade as the primary drivers for the downgrade.

Moody’s projects the U.S. debt-to-GDP ratio to rise from nearly 100% in 2025 to approximately 130% by 2035. In a statement released in late March, Moody’s noted that even under favorable economic conditions, the affordability of U.S. debt remains significantly weaker compared to other Aaa-rated and highly-rated sovereign nations.

Moody’s also pointed to the consistent failure of successive U.S. administrations and Congress to implement measures that would reverse large annual fiscal deficits and the increasing costs of interest payments.

The agency anticipates these trends will persist without substantial reductions in mandatory spending or deficits, leading to further increases in debt and interest burdens over the next decade.

“While we recognize the US’ significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,” Moody’s stated on Friday, according to Bloomberg.

Price Action: The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, ended higher on Friday. The SPY was up 0.63% to $594.20, while the QQQ advanced 0.44% to $521.51, according to Benzinga Pro data.

On Monday, the futures of the S&P 500, Nasdaq 100, and Dow Jones were trading lower.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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