Moody’s Investors Service downgraded the United States government’s credit rating from AAA to AA1, citing concerns over the nation’s growing fiscal deficit and elevated debt-to-GDP ratio.
This downgrade has raised questions among Indian retail investors who have diversified globally, particularly regarding their investments in U.S. funds.
The downgrade reflects the increasing difficulty the U.S. may face in servicing its debt due to the high debt-to-GDP ratio. Pratik Oswal, Chief of Passive Business at Motilal Oswal Asset Management Company, emphasized that the substantial debt levels could pose challenges for the U.S. in meeting its debt obligations.
Despite the downgrade, financial experts suggest that Indian investors with a long-term investment horizon exceeding seven years and exposure to U.S. funds below 20% should consider maintaining their current positions.
The rationale is that the U.S. economy retains strong fundamentals, and the downgrade may not significantly impact long-term investment returns.
However, investors are advised to monitor their portfolios and consider diversifying to mitigate potential risks associated with the U.S. fiscal outlook.
Staying informed about global economic developments and consulting with financial advisors can help investors make prudent decisions regarding their international investments.
