Fitch’s US debt-rating downgrade is bad news for stocks. Here’s everything you need to know.

• Fitch cut the US’s credit rating Tuesday, citing rising debts and an “erosion of governance.”
• It came two months after Biden and House Republicans reached an 11th-hour deal to stop a default.
• Stocks declined after the agency’s shock announcement.

August is usually the quietest month of the year for the stock market.

But Fitch shattered any sense of summer calm last night when it slashed the US government’s credit score, in what could end up being a massive blow to President Joe Biden’s economic track record.

Here’s everything you need to know about the ratings agency’s shock move.

What happened?

On Tuesday, Fitch downgraded the US’s long-term rating from the top-tier AAA score to AA+.

That means it believes the government is now less likely to be able to repay its debts, only two months after Biden and House Republicans reached an 11th-hour deal to avoid a catastrophic default.

Fitch said the last-minute debt-ceiling deal after months of shutdown had failed to convince it that Congress would be able to avert future calamities.

“There has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” it said in a statement.

Source: Business Insider