TradingKey-on last FridayMoody'sAfter downgrading America's last AAA sovereign credit rating, global investor panic soared amid concerns about US fiscal sustainability. The VIX panic index jumped 15% on Monday, May 19.
As of writing, the VIX Panic Index is up 12.06% at 19.32. The VIX index reached a historic high of 60 before Trump's reciprocal tariffs took effect in April, and then fell sharply as tariff trade negotiations began one after another.
The VIX Panic Index measures investors' feelings about the next 30 trading daysS&P 500Expectation of index volatility, the larger the value, the higher the market risk.
The trigger for the surge in the VIX index was that Moody's, an international rating agency, downgraded the sovereign credit rating of the United States, which made the United States lose its last highest rating of 3A, on the grounds that the debt burden of the United States was increasing and the fiscal deficit may further deteriorate.
After losing a high credit rating, U.S. debt investors will demand higher yields to compensate for greater potential risks, especially long-term U.S. debt. On the 19th, the 30-year US Treasury yields continued to rise and is now trading at 5.03%, the highest since October 2023. This is unusual in a rate-cutting cycle where the Fed has already cut interest rates three times.
If interest rates continue to rise, the difficulty and cost of borrowing in the United States will further increase, which may lead to an a vicious circle of fiscal unsustainability in the United States.JPMorgan ChaseThat's a reminder that the cost of dragging fiscal issues out will be huge, analysts say.
Before the U.S. stock market opened, major stock index futures fell across the board, and S&P 500 futures fell by more than 1%.
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