Marc Stacey, Senior Portfolio Manager for Investment Grade, discusses how investors who look at a global opportunity set can add value and reap potential rewards.
Key takeaways:
- Political uncertainty, fiscal expansion and shifting trade rhetoric are prompting a reassessment of US risk.
- Recent events have shown that the world’s largest economy cannot take market confidence for granted. This was underlined by Moody’s’ decision to downgrade the US sovereign credit rating.
- US credit still represents a large and liquid market, but for many investors, it may no longer be the obvious starting point it once appeared and the scope to add value is expanding.
There’s an old saying in financial markets – “When Wall Street sneezes, the world catches a cold”. For decades, US markets have been the epicentre of global investing, setting the pace, direction and tone for risk appetite everywhere else. However, in 2025, that gravitational pull may be weakening.
Confidence in the US – economically, fiscally and politically – is starting to fray. Trade policy is increasingly erratic. The fiscal trajectory is unclear. Markets have already responded with volatility, and investors are questioning whether the US can still offer the clarity and stability that once set it apart.
The cracks are starting to show
Political uncertainty, fiscal expansion and shifting trade rhetoric are prompting a reassessment of US risk. After the so-called “Liberation Day” tariff announcements triggered a broad market correction, the US administration softened its stance, pausing implementation and entering negotiations with key trade partners. More recently, court challenges have thrown fresh uncertainty over whether the proposed measures can be implemented at all.
Meanwhile, a disappointing Treasury auction in May highlighted investor unease at the scale of America’s unfunded spending plans – and, more broadly, at the lack of policy clarity. Though subsequent auctions have been better received, the episode served as a reminder that even the world’s largest economy cannot take market confidence for granted. That point was underlined by Moody’s’ decision to downgrade the US sovereign credit rating – a move that reflects mounting concern over persistent deficits and an expanding debt burden.
