- Goldman Sachs says that US dollars and Treasurys remain safe global havens.
- Fitch’s downgrade of US debt to AAA+ was the reason for the comments.
- Goldman noted that “investors need to continue to look to Treasuries if they want safety quickly.”
The US dollar, Treasury bonds and other global safe-haven assets remain for investors. Fitch has downgraded US Government debt.According to Goldman Sachs.
Fitch downgraded US government debt from AAA to AA+ earlier this week, due to the tendency of the federal governments to engage in a political struggle when raising the debt limit is needed.
The downgrade came 11 years after S&P downgraded the US to AA+ for similar reasons. Moody’s, the only rating agency still giving the US triple-A ratings, is the sole one.
Goldman Sachs, however, is not concerned about the downgrade. They believe that any flight to safety by investors will favor US dollars and Treasury Bonds. This is in line with Warren Buffett’s recent remarks about Berkshire HathawayThe following are some examples of how to get started: JPMorgan CEO Jamie Dimon.
Michael Cahill, Goldman Sachs economist, wrote in a note on Thursday: “We don’t believe there will be any meaningful Treasury holders who are forced to sell their Treasury securities due to a downgrade.” “And by definition, the supply of AAA sovereigns is limited elsewhere.”
Germany, Denmark Netherlands Sweden Norway Switzerland Luxembourg Singapore Australia and Germany are the countries with the highest ratings at the three major rating agencies. Their debt markets aren’t as liquid or deep as those for US Treasury bonds.
Investors need to continue to look to Treasuries for safety when they are in a rush. Cahill continued, “For similar reasons, the Dollar remains the safe-haven in a market where yields rise and equity prices fall, which was key to the dollar’s performance in 2022.”
The occurrence of this phenomenon was clearly visible on Wednesday. US Dollar IndexThe Fitch downgrade of debt caused stocks to fall by 0.30%.
Goldman Sachs anticipates that any future depreciation of the US dollar will be “shallow” and “bumpy.”
“Overall we believe it is difficult for the dollar’s value to fall meaningfully while US activity is outperforming. The policy outlook isn’t that divergent. And US total capital returns prospects still offer an excellent buffer in comparison to the main ‘challengers” of the Eurozone and China,” said he.
