S & P Rating Sends U.S. Stock Market into a Downward Spiral

S & P Rating Sends U.S. Stock Market into a Downward Spiral

The S & P agency that downgraded the U.S.from the top AAA rating to an AA+ rating after what was a “bloody” day on the stock market last Friday, proved to continue to cause the deepest drop in theU.S.stock market since the 2008 financial crisis!

When I heard the news of the lower rating over the weekend, I knew the stock market would not take to it well, even with the spin our government took stating that “they had a plan” to get us out of our debt crisis.  Really?  Unless their plan was to abolish whatever savings the middle class had in its portfolio by a devastating blow over the last two weeks in the stock market, then there is not a “plan”.  The two parties in Congress barely agreed on a debt ceiling agreement which was too little, too late!

The Dow fell another 5.55% today to 10,809.85, the NASDAQ by 6.9% while the S&P fell by 6.66% to 1119.46.   There were billions lost over the past few weeks by those who can ill afford to lost the money who have annuities or are living on fixed-income or spent years saving money for retirement just to have it evaporate overnight!  It was a sad day for America.

Euro markets are also struggling as released plans to buy Italian debt and Asian markets also were in the red, but not nearly as down as the U.S.  The U.S stock market was actually holding at 300 down until President Obamas’ mid-day speech when stocks tumbled by another 300-plus points. He said, “Our challenge is to tackle our deficits over the long term.  But here’s the good news.  Our problems are eminently solvable and we know what we need to do to solve them.”  The financial community evidently does not think that our government knows how to “fix” our economy

With 14 million people unemployed and our employment rate holding study at just over 9%, the fear of a double-dip recession is looming as the VIX (Wall street fear index) went up today from 44%-45.98%.  What I fear is the continual destruction of the middle class.  The inability to make money, save money and pay into our government system is becoming more real than many want to admit.

As the homeless man shown in the attached photo sleeps in front of the high-end luxury retail store, Ralph Lauren, it makes me wonder just how many of us middle class workers end up on the street, sleeping in front of a store we once dreamed of shopping in.

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  • At the time, that wasn't clear--in that people (probably hedge fund and pension fund managers) were taking money out of the stock market and putting it into Treasury notes, sending yields to all time lows, even though the U.S. was devalued by one rating agency.

    In retrospect, supposedly all of that loss has been made up, although not in particular sectors such as financials. Looks like the managers took their cash out of parking.

    So, despite conventional wisdom, all the last week proved was that markets are volatile. Like they were in 1987, 2000, and 2008.

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