What is Happening in the Market

In the past week we have seen a massive sell off in the equities markets (stocks), a downgrade of U.S. Sovereign debt and interest rates that are dropping like a rock.

So what does all this mean and how did it happen?

First off, the downgrade in the credit rating of our nations debt does not seem it has anything to do with the amount of debt we have but more on the inability of our elected officials to govern.  The down grading of our U.S. debt has had some ironic effects.  Since Standard and Poor has downgraded the US credit rating from AAA to AA+ we have seens a massive sell off in the stocks. 

And where has this money gone?  It has gone to the safest investment in the world, U.S. debt, specifically treasury securities.  So the downgrading of the U.S. debt has created a massive demand for it.  Hmmm interesting. 

Also bank stocks have been taking a real hard hit lately.  So people are selling off their stock in the big banks and putting it where?  Into those same banks.  Another bit of irony I would say.

All of this, coupled with The Federal Reserve stating that it will hold short term interest rates low until at least 2013 has lowered long term interest rates significantly in the last two days.

What does that mean to us?  Our investment accounts are losing value but the interest rates on mortgages are dropping to unseen levels.  For those that can qualify to refinance their home loans this may be the best time to do it.

Tomorrow is another day and it will be interesting to see what happens next.

All the best.