Your Capital Markets Snapshot: Equities, Bonds, US Dollar Fell Last Week

Equities, bonds, and the US dollar fell last week due to US budget concerns and increased uncertainty surrounding US tariff policies. US debt was downgraded by Moody’s due to concerns about lack of progress from prior Congresses and presidential administrations to curb rising government deficits. Standard & Poor’s (2011) and Fitch (2023) previously downgraded US debt. Now all three major rating agencies align on an AA-rating. A tax bill passed from the House to Senate seeking to extend the 2017 tax cuts with additional provisions. Congressional Budget Office estimates the net impact of tax cuts, new spending, revenue, and additional interest-rate costs to increase the federal budget deficit by $3 trillion over the next decade. Long-term interest rates have been trending upwards since September 2024, when the rate cutting cycle began. The combination of increasing debt levels and higher interest rates are driving federal interest costs to historic highs. Trump threatened the EU with 50% tariffs and Apple with a 25% rate, which served to increase uncertainty around US trade policies and contributed to the down week for equities. As negotiations progress, trade uncertainty should decrease but as last week showed potential for bumps along the way remains.