Wall Street is once again jittery about American investments after Moody’s issued a major warning about the safety of U.S. debt, downgrading the country’s credit rating late Friday. This marks the first time since 1917 that Moody’s has lowered America’s rating, stripping it of its perfect AAA status due to soaring debt levels and ongoing political gridlock over deficit reduction.
Markets reacted sharply on Monday. The Dow fell 277 points (0.6%), the S&P 500 dropped 1%, and the Nasdaq sank 1.5% at the opening bell. Investors also sold off U.S. Treasuries, pushing the 10-year yield above 4.5% and the 30-year yield past 5%. The dollar declined 0.8%, while gold surged 1.6% to $3,236 a troy ounce as investors looked for safer assets.
This latest development revives the “sell America” trend that previously emerged amid concerns over former President Donald Trump’s trade policies. After markets initially rallied on Trump’s tax-cut promises, fears over tariffs triggered a retreat from U.S. assets earlier this year. Though markets briefly rebounded in mid-April when trade tensions eased, Moody’s downgrade is now threatening that recovery.
Treasury Secretary Scott Bessent attempted to calm nerves, saying Moody’s relied on “outdated” data and downplayed the downgrade’s impact, echoing similar remarks made in 2023 when Fitch also downgraded U.S. debt. When asked whether Trump’s new tax cut proposal would worsen the debt crisis, Bessent insisted it would boost the economy enough to improve the debt-to-GDP ratio.
That ratio stood at 123% in 2025, up from 92% when S&P downgraded U.S. debt in 2011.
Market analysts are divided. While Citigroup said the downgrade “makes little if any difference” for most investors, they warned the timing could hurt sentiment—especially with lower tariffs reducing fiscal space while potential tax cuts increase risks. They even compared the situation to the U.K.’s 2022 “Liz Truss moment,” when poorly timed tax cuts rattled markets.
Chris Rupkey, chief economist at FwdBonds, echoed the concern, saying Washington’s “budget-busting” plans are likely fueling fears. He noted that while the Fitch downgrade had a muted effect, S&P’s 2011 move caused stocks to drop nearly 7% in a single day.
Fiscal watchdogs say Moody’s decision should be a wake-up call. Michael Peterson, CEO of the Peter Peterson Foundation, called it a sign that the U.S. must stop adding to its national debt. “It’s unacceptable for a great country like America to harm its own credit rating,” he said.
What a Renewed ‘Sell America’ Could Bring
If the market reverts to full “sell America” mode, the fallout could be severe. Earlier in the year, investors pulled out of both U.S. stocks and Treasuries, shifting into gold and foreign markets. Treasury yields climbed, and gold prices hit record highs above $3,000.
Trump’s aggressive trade stance is also back in focus. Despite claiming inflation was inherited from President Joe Biden, markets had initially surged after Trump’s 2024 election win. But his tariff threats, including his “Liberation Day” measures announced April 2, led to a steep market drop. The S&P 500 fell nearly 20% between February’s peak and the April 9 pause on new tariffs.
Bessent warned Sunday that if countries affected by Trump’s “reciprocal” tariffs don’t reach deals, they could soon face rates as high as 50%. “President Trump has put them on notice,” Bessent told CNN.
With a credit downgrade, potential tax cuts, and renewed trade wars on the horizon, investors now face
