It was the thud heard round the street, and this weekend's S&P downgrade of the U.S. long-term sovereign credit rating left many wondering what the impact would be on the economy. The experts are divided on the immediate effect on interest rates. Certainly, worries about Fannie Mae, Freddie Mac, and FHLB are very real, given their downgrade too. While the drop from the top triple-A status to AA+ was a major blow to the U.S.'s pristine credit rating, it was, more so, a condemnation of the political process and ballooning budget. But what does it all mean for finance jobs?
In the very short-term, not as much as might be expected, given the change still keeps the credit rating as investment grade. Interestingly, Securities Technology Monitor reports that operations executives at banks, fund managers, brokerage firms, and valuation companies will feel some impact, as they work overtime to correct prices on fixed income securities.
Despite the widespread fears for the treasury market, much of the concern seems to be unfounded. The unease with the stock market, and continued pullout from it, is keeping the treasury market going strong.
What's also likely to happen, at least for the near term, is the current flight to commodities will continue and bring more and more folks to this side of the business. Spot gold hit a record high today.
Another more immediate impact is being felt at a number of insurance companies that suffered a real dent in the armor, as they saw their long-term counterparty credit and financial strength ratings lowered as a result of the downgrade.
A selloff of financial stocks-insurance companies, banks and investment firms-is definitely going to put a damper on any future hiring plans, as they rightfully worry about profits and what else may come down the road. That's really bad news given the recent spate of large scale layoffs at some of the major financial players.