By coinnews 
00:00 Speaker A
The sell America trade, back in full force on Wall Street after Moodys cut the US credit rating, citing concerns over the country’s ballooning budget deficit and rising debt. So, what does this mean for investors? Joining us now, Yahoo finances Josh Shafer. Josh, we had a couple weeks of reprieve where we weren’t talking sell America constantly, but it seems like it’s back this morning. How much do you think that this sell America trade chapter of the story has legs?
00:36 Josh Shafer
Yeah, Mandy. I mean, if you just look at the market action this morning, you’re certainly seeing that it has at least a little bit of legs, right? You have weaker dollar, you have treasury yields up, you have futures tied to US equities down. So of course, that’s sort of the core of what we have come to call that sell America trade, right? But I think Wall Street strategists reacting to this Moodys downgrade of US credit, essentially saying, I’d probably be buying the dips. You had Tom Lee from Fundstrat saying that. Of course, people always like to say Tom is perhaps a little bit often bullish, but Mike Wilson over at Morgan Stanley, who has not necessarily been bullish on a consistent basis over the last couple years, also coming out and saying he would buy the dip. So Lee over at Fundstrat essentially calling this a non-event and sort of pointing out that I don’t think before last Friday, you or I weren’t aware that we had a ballooning deficit here in the US, right? I think that is a rather an accepted fact that has been a part of the market, right? So if you were an equity investor and that was a concern on Thursday, I don’t really know how much Friday’s news from Moodys should really change your opinion. Wilson sort of pointing out that this actually comes at a good time just from the market narrative standpoint, right? So if you think about we’ve had the S&P 500 up for five straight days, you have this 90-day tariff pause with China that’s sort of spawn this stock market rally, you’ve just had a positive earnings season. It’s not like this is another negative headline on top of other negative headlines that keep coming through, which is sort of where we were a month ago. We’re at a place now where maybe the market can sort of take a negative headline, swallow it, move on, and be in a better position, which I think again is a different spot than we were in at the start of April.
03:02 Speaker A
And historically speaking, you pointed out some data this morning indicating that downgrades like this, they don’t typically lead to a huge market crash, right?
03:11 Josh Shafer
Yeah. So if you go back to 2011, you had the S&P downgrade of US credit, and then if you go to 2023, you had a fixed downgrade of US credit. You did see markets fall in initial reaction to this, but if you look at a long-term chart from 2011 to now, of course, equities have done rather fine. If you look at a chart from 2023, August 2023 to now, stocks have held up pretty good. And I think importantly, both those time periods, while people were talking about recession, the US economy didn’t actually necessarily go into a recession in that time period, right? So it’s sort of similar perhaps to right now where we’re talking about weaker economic data and sort of the overall growth concerns. And if you go back to 2023, that was sort of the recession that never came, right? So this isn’t necessarily something that’s telling you this ominous thing is definitely coming. Again, not all of this, not to say that the deficit doesn’t matter, right? I understand the concerns there and other guests will be able to explain that a little bit better for you, but just from an equity perspective, how strategists are talking about what this means for the stock market, essentially basically a non-event.
04:51 Speaker A
It’s a zombie that appears at a date that we just don’t know when it comes to the deficit. One thing I am curious about is if we look super short-term, Stuart Kaiser had a note out over the weekend on how this coming week, we don’t have a ton of eco data, we don’t have a ton of huge movers when it comes to earnings. So, is this going to continue to be the story throughout the week, this downgrade putting a little bit of pressure on stock, even if long term it’s not a huge issue?
05:24 Josh Shafer
It feels like it, right? There’s really just, if you look at the calendar this week, there’s essentially no major economic data releases. There’s basically nothing all week. Then you look from an earnings perspective, you have retailers where, honestly, the concern would probably be to the downside for some of the retailers, right? What are Target and Home Depot are going to say about tariffs? Are they also going to talk about raising prices in the same way that Walmart did? And so when you think about just what’s in focus this week, not a lot of potential upside catalyst, it doesn’t seem, and think about the last month and a half, or I guess really probably since President Trump got in office in January, during a quiet week, Washington has sort of led the market, right? Investors are looking for something. So it’s sort of been Washington has been that key catalyst in the quiet weeks. I would probably expect that to be a leader for sure.
06:33 Speaker A
And maybe tariff negotiations according to Haset this morning. That’s a key thing to watch this week as well. Josh, thank you as always. Really appreciate your insights.
06:45 Josh Shafer
Thank you.