Fitch Warns USA’s AAA-Rating At “Risk Of Near-Term Negative Action”

In what some may call the ‘worst’ affirmation of a ‘AAA’ rating, Fitch has published a somewhat damning set of reasons why that AAA-rating may not last due to soaring debt, shrinking GDP, and the “helicopter-money” anti-virus actions.
Notably, the sovereign credit risk of USA has been notably rising since ‘helicopter money’ began to make the mainstream two weeks ago…

Full Fitch Statement: Key Rating Drivers
The U.S. sovereign rating is supported by structural strengths that include the size of the economy, high per capita income and a dynamic business environment. The U.S. benefits from issuing the U.S. dollar, the world’s pre-eminent reserve currency, and from the associated extraordinary financing flexibility. Fitch considers U.S. debt tolerance to be higher than that of other ‘AAA’ sovereigns. However, high fiscal deficits and debt — which were already rising even before the onset of the huge economic shock precipitated by the coronavirus — are starting to erode these credit strengths.
The risk of a near-term negative rating action has risen given the magnitude of the shock to the economy and public finances from the coronavirus and the commensurate and necessary fiscal policy response, particularly in the absence of a credible consolidation plan for the country’s pre-existing, longer-term public finance and government debt challenges.
The coronavirus has inflicted an unprecedented shock on financial markets and economic activity, with policymakers struggling to avert a longer-lasting downturn. In common with other advanced countries, the U.S. has shut down parts of its economy to slow the spread of the disease, which will cause a deep contraction centered on second-quarter 2020 (2Q20) and a massive rise in unemployment. In its baseline, Fitch assumes containment measures can be unwound in the second half of 2020 (2H20), allowing for recovery in sequential growth and labor markets. With …
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