McCarthy Speaker Defeat Raises Risk of Credit Downgrade, Potential Economic Damage
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Ousting of Rep. Kevin McCarthy as House Speaker could lead to a credit downgrade that damages the US economy.
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In 2011 and 2022, credit downgrades by S&P and Fitch led to stock selloffs and higher yields.
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Now only Moody's rates US debt as AAA, and it warned last week a shutdown could prompt a downgrade.
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McCarthy's ouster is an even clearer sign of "intensifying political polarization" than a shutdown.
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A Moody's downgrade could spike yields further, raise borrowing costs, add pressure on the economy, and increase recession odds.
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