Moody Bank Downgrade Triggers Retail Concern – JPM, BAC, WFC in Focus

U.S. bank stocks drew notable attention from retail investors on Monday after Moody’s downgraded the long-term deposit ratings of Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), and JPMorgan Chase & Co. (NYSE: JPM). The move follows the recent U.S. sovereign credit rating cut from Aaa to Aa1, citing rising national debt and ongoing political instability.

Moody’s dropped the banks’ long-term deposit ratings from Aa1 to Aa2, warning that the U.S. government’s ability to support major banks has weakened. Additional downgrades hit senior unsecured debt and issuer ratings for certain units of Bank of America and The Bank of New York Mellon (NYSE: BK), along with counterparty risk ratings (CRRs) for branches of State Street (NYSE: STT).

“The downgrade of the U.S. Government’s rating indicates its ability to support globally systemically important banks has weakened,” Moody’s stated.

This comes as House Republicans struggle to pass a government spending bill that includes extending Trump-era tax cuts and advancing the administration’s immigration agenda.

Key Stats:

• U.S. Federal Debt: ~$36 trillion

• Projected Interest Payments by 2035: 30% of government revenue

Meanwhile, JPMorgan warned of rising economic uncertainty, pointing to a challenging mix of large fiscal deficits and persistent inflation that could limit future policy responses.

Sentiment on Stocktwits turned bearish for JPM, BAC, and WFC, with some retail traders pointing to Warren Buffett’s Berkshire Hathaway (NYSE:BRKa), which began reducing its bank holdings in Q1.

In response to market stress, the Trump administration is reportedly exploring a plan to lower capital reserve requirements for banks, potentially freeing them up for more aggressive lending and market intervention.

Despite the uncertainty, bank stocks have seen YTD gains:

• Bank of America: +1.4%

• Wells Fargo: +4.8%

• JPMorgan Chase: +10%

 

 

 

 

 

 

FAQ

Q: What does a Moody’s Downgrade mean?

A: It means Moodys, a credit rating agency, is warning the world the US is like a dead-beat dad who is spending borrowed money, without a job, and not taking care of his family.

Q: What else does a Moodys down grade mean?

A: A Moodys downgrade will probably mean higher interest rates which means a US in recession, which means the economy will slow, unemployment will climb, bond market, housing market, and weak banks may fail….which may mean 1929 Depression.

Q: What should people do?

A: As I have been saying….I predicted this in my 2013 book Rich Dad’s Prophecy.

I have always recommended people become entrepreneurs, at least a side hustle, and not need job security. Then invest in income producing real estate, in a crash, which provides steady Cashflow.

I also recommended saving real gold and silver and today Bitcoin.

The good news is….in a market crash becoming an entrepreneur may become easier, real estate becomes cheaper….as a crash opens up opportunities… not available in a strong economy.

FYI: a depression can be the best time to become rich….if you open your eyes and start seeing the through the eyes of an entrepreneur….rather than an employee clinging to job security, steady paycheck and a crashing 401k.