To help us evaluate and understand the implications of current events we find it helpful to look at past market behavior. With Standard & Poor’s downgrade of the U.S. debt rating from AAA to AA+ we were interested in learning how other markets fared after a downgrade to their credit worthiness.
Interestingly, there have been 11 downgrades of sovereign country debt ratings over the past 25 years. In 8 of those 11 cases, the stock markets of the affected countries were higher 12 months after the downgrade occurred, and the average stock market increase was 17%.
Source: BlackRock, Inc.