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David Miller, partner, Cheviot Asset Management

Comment: Rating agencies have given the US the benefit of the doubt for too long 


Rating agencies have given the US the benefit of the doubt for too long and that the decision of S&P to downgrade it’s AAA rating “is a warning shot across the bows of US politicians," according to David Miller, partner at Cheviot Asset management…

S&P’s decision to downgrade its US debt rating is not entirely unexpected and could well be followed by further downgrades.
However, what must be remembered is that post-2008 many investors have developed their own credit rating systems and so are less reliant on rating agencies. Furthermore the Fed has already sent out reassuring messages to the banking industry and US Treasuries will still be accepted as collateral.

Monday morning will be an important indicator of what’s to come and how investors will react. It is unlikely that non US banks, sovereign wealth funs and creditor governments will panic sell. However, it will be worth watching derivative markets that use US Treasuries as a proxy for risk-free collateral. There may be some volatility here.
On balance the Markets are unlikely to go up, but a meltdown is not on the cards.

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