JAKARTA – The S&P 500 may be headed for a decline after Moody’s downgraded the United States’ perfect credit rating to “Aa1” with a “stable” outlook on Friday (16/5) local time.

This move officially strips the US of its perfect credit rating from all three major global rating agencies: S&P, Fitch Ratings, and Moody’s.

According to historical data shared by Adam Khoo, a Singaporean entrepreneur and professional stock investor, via his Facebook account, each time the US credit rating has been cut, the S&P 500 has tumbled.

In August 2011, S&P became the first global credit rating agency to downgrade the US credit rating. At the time, the S&P 500 fell 10.37% following the announcement.

A similar trend occurred when Fitch Ratings downgraded the US in August 2023, with the S&P again dropping 10.31% within 58 trading days.

However, Khoo also noted that these sharp sell-offs revealed hidden opportunities. The S&P 500 was able to rebound by 36% and 37%, respectively, in the 12 months following the two major downturns in 2011 and 2023.

“If the S&P 500 drops another 10% this time, it will be a great opportunity for me to increase my holdings in high-quality companies again,” he said.

According to him, investor panic selling could provide an excellent chance to accumulate shares of The Magnificent Seven, such as Amazon, Microsoft, Google, and Meta, at “discounted” prices.

At the close of trading on Friday (16/5), the S&P 500 was still up 0.7% to 5,958.38. The Dow Jones Industrial Average rose 0.78%, while the Nasdaq gained 0.52%. (ZH)