Market Analysis: Fitch Downgrades US Credit Rating

<img src="https://fxopen.com/blog/en/content/images/2023/08/fitch-rating.jpg" alt="Market Analysis: Fitch Downgrades US Credit Rating" /><p>Fitch has downgraded the US sovereign credit rating by one level from AAA (held since 1994) to AA+ — having warned about this 2 months ago. However, the news came as a surprise.</p><p>The reason for the downgrade is the high and growing debt burden. This manifests itself in repeated debt ceiling cancellations and last-minute decisions. The last example is the events this spring.</p><p>Fitch analysts expect that:</p><ul><li>the state budget deficit will rise to 6.3% of GDP in 2023 from 3.7% in 2022;</li><li>tightening credit conditions, weakening business investment and slowing consumption will push the US economy into a moderate recession in Q4 2023 and Q1 2024.<br></li></ul><p>By the way, the last time the US rating was lowered was in 2011, also in August. Standard &amp; Poor&apos;s then downgraded the US credit rating from the maximum &quot;AAA&quot; to &quot;AA +&quot;. This caused the stock market to fall.</p><figure><img src="https://lh4.googleusercontent.com/3RbiWGzYZys4p0AQTlyfQkyo6c5SbAPnlxOdMKzCYRGifaR9hN_zQq41U5fiGbJW9HS14i3djc6JqOLTGFamAcMIuVYZCI0pnQbFPvx9RF7OcA87xThq5ydw2ZsLeJNDV5oDnmdlX3ABl8mzR-L-Fbc" alt="Market Analysis: Fitch Downgrades US Credit Rating" loading="lazy" /></figure><p>We wrote in our <a href="https://fxopen.com/blog/en/oa-market-analysis-us-stocks-continue-to-rise/?utm_source=blog&amp;utm_medium=post&amp;utm_campaign=analysislinks">review</a> on July 31 that the stock market is in a vulnerable position for a correction. As expected, the downgrade helped push the S&amp;P 500 off the highs of the year, dropping below the psychological 4500 level.</p><p>Support levels can slow down the fall of the S&amp;P 500 index:</p><ul><li>around 4,450 is the former resistance level;</li><li> median line of the ascending channel.</li></ul>