S&P Downgrades US Credit Rating

After markets closed on Fri, S&P announced that it was downgrading the United States from the top shelf AAA credit rating to AA+.

In its report, S&P based its rationale on the recent turmoil surrounding the debt deal which the agency said reduces clarity on US capacity for reducing spending and controlling debt.

The chatter that I have heard this weekend in the wake of the downgrade has been bearish. e.g, 'expect another 6-10% down in markets over the next couple of weeks.' Indeed, that could occur.

On the other hand, it is possible that some of the decline that we saw last week was market participants pricing in the downgrade. In such case, it shouldn't be surprising that we actually rally now that the news is out.

In any event, all eyes will be watching the action early in the week for more clues.

position in SPX