S&P has downgraded the US credit rating from AAA to AA+. I don’t think this should have a meaningful impact on the market. With the European crisis going on, even if there turns out to be a sell off on Monday it would be very hard to figure out what is the real reason.
Markets typically react with a big price change to new or unanticipated information. There is nothing new that S&P has uncovered about the US fiscal situation. In fact some of the sell off we had this week may have already priced in this downgrade as it was a well known fact in advance that S&P wanted a $4 trillion cut in the deficit to maintain a AAA credit rating. Also ratings are more valuable on securities which are very complex in nature or where there is not enough information available that you want the expertise of a rating agency to guide you. The financial information of the US government is very transparent and the US treasury bond market is the largest and most liquid in the world. So this market really does not need ratings agencies it will always move ahead of ratings agencies.
One area where there might be a real impact is that there are some contracts which allow a financial institution to hold only AAA rated bonds in certain investment funds. I am not sure what will be the real impact of this, my guess is that instead of dumping treasuries a lot of these contracts might be modified.