Stocks spent the past two weeks marching higher because Washington and Beijing agreed to slash punitive tariffs for a 90‑day cooling‑off period, and that truce lifted the S&P 500 back to positive levels for the year. There have been plenty of organizations and institutions warning about trouble, but none of that has really materialized in the hard data.
You could say the same about Moody’s downgrade, but it has started to impact the market already. 30-year Treasury yield went above 5%, and pre-market turned red after the U.S. went from Aaa (the highest) to Aa1, which is the second-highest rating. This has been done for the first time since 1917. The rationale was the high debt level and a deficit that even DOGE has failed to make meaningful progress on.
Of course, fear is not a strategy, and I wouldn’t sell all my growth plays immediately. Smart investors keep playing offense when prices dip, but they also keep a few bodyguards in the portfolio. As such, I’d suggest looking into some defensive stocks if the market keeps souring.
This post originally appeared at Money Morning.