M&G's Smith: The three major issues facing the US

THE THREE MAJOR ISSUES FACING THE US

Putting the downgrade into perspective

There are three major issues facing the US in light of S&P's downgrade of its AAA rating on US sovereign debt: • Lack of confidence in policymakers • Weakening prospect of a significant economic recovery in the second half • A weak longer-term growth trajectory Falling confidence in policymakers has increasingly weighed on the minds of investors in recent months, which, together with a softening economic backdrop, has driven the recent market falls, and was stated by S&P to be a key driver of its decision. In the short term, the S&P downgrade of US debt weakens further market sen...