Give the stock market half a chance and it will dominate the financial headlines. That was certainly the case for the month of July, with the S&P 500 powering upward and bonds barely treading water.
But August has been different, with the stock market hitting a speed bump and the bond market getting attention for an unwelcome reason: a downgrade of U.S. Treasury debt by the Fitch Ratings agency. Fitch says the deterioration in political consensus and the increasing debt levels of the United States mean that it no longer ranks unequivocally as among the safest places to invest in the world.
That’s significant. Because the enduring appeal of bonds comes from their relative safety — and not from spectacular gains and losses that define the stock market’s flamboyant brand — the Fitch downgrade can’t be easily dismissed.
Yet it makes sense to hold U.S. debt anyway, despite tremors…
