This week is the one year anniversary of the rating downgrade of U.S. government debt. America had AAA rating for over 70 years, and last year’s downgrade brought warnings from many that the interest rates on U.S. government debt would be rise and inflation would begin to rise. Those fears did not come true.
Since the U.S. debt downgrade, the interest rate on the 10-year Treasury Bond has actually fallen from 2.57% last year, to less than 1.50% today. The fears of rising interest rates and inflation did not come true. Despite all of these fears a year ago, the U.S. government remains a “safe haven” bond.
The market headlines seem to be always filled with the next fear; Greece is about to default, China is headed for a economic collapse, and the U.S. election and “fiscal cliff” will paralyze the economy. These fears have been with us through the ups and downs this year, and though the global economy has been slowing, the S&P 500 has managed a 10% gain through July. Wall Street always finds a way to “climb the wall of worry” and the successful long-term investor learns how to invest through the fears. Please call us with any questions or concerns. Feel free to forward this to others who might be interested.
Have a great day!
The All Star Team