Moody’s recently downgraded the U.S. credit rating from Aaa to Aa1—joining Fitch and S&P in removing the country’s top-tier status. This shift stems from mounting national debt, persistent deficits, and political gridlock over the federal budget. While headlines like this can feel alarming, it’s important to understand the broader context.
Yes, debt matters—but perspective matters more
Budget negotiations and debt ceiling showdowns are nothing new. We’ve seen them in 2011, 2013, 2018, and 2019, and each time, markets eventually stabilized. Even after the 2011 downgrade, which caused a market correction, the S&P 500 fully recovered within months.
Despite the headlines, U.S. Treasury securities remain a global safe haven—backed by the strength, diversity, and resilience of the U.S. economy. For long-term investors, this isn’t the first bout of volatility, and it won’t be the last. But history has shown that those who stay disciplined and diversified have weathered far more challenging conditions.
What’s happening now?
Congress is crafting a new budget, with talk of extending key provisions from the 2017 Tax Cuts and Jobs Act. If passed, individual tax cuts could become permanent, the child tax credit may increase, and business deductions could expand. Meanwhile, other proposals include exempting tips and overtime from taxation and introducing new savings accounts for children.
While some spending cuts are on the table, they’re offset by other increases—meaning deficits may continue to grow. The national debt already exceeds $36 trillion, and the current proposal could add another $3–4 trillion over the next decade.
So what should investors do?
First, avoid making knee-jerk decisions based on headlines. Fiscal policy matters, but it’s just one piece of a much larger economic puzzle. Historically, strong market returns have often followed periods of fiscal concern—not because of the deficits, but because investors who stayed invested were positioned for recovery.
Second, focus on what you can control. A well-structured financial plan—tailored to your goals, grounded in evidence, and adjusted as life evolves—is still your best defense against uncertainty.
Bottom line:
Yes, the downgrade is a reminder of long-term fiscal challenges. But history has shown that investors who stay focused, diversified, and patient tend to come out ahead. At Uplevel, we believe your financial plan should reflect clarity, resilience, and purpose—not the mood of the moment in Washington.
If you have questions about how these developments might impact your plan, we’re here to help.
Uplevel Wealth is a fee-only, fiduciary wealth management firm serving clients in Portland, OR, and virtually throughout the U.S.
