The Downgrade Of Portugal Is Already Baked Into The Cake
This afternoon, the U.S. Dollar Index has soared higher after Moody's downgraded Portugal's debt rating to Ba2 from Baa1. Are you kidding me? Traders have been saying this would happen for weeks. Obviously, Ireland is going to be the next country to get downgraded as they, along with Greece and Portugal were just bailed out. This downgrade was already baked into the cake by most institutional stock market investors and traders. The stock market is barely trading lower on the news. When you combine this news with the light trading volume the S&P 500 Index may finish the day flat to positive by the close.
The real shock will hit the stock market when the rating agencies downgrade countries such as Spain, and Italy. These are much bigger economies that will cause a real shock to the system. Most traders and investors know that these countries will eventually have to be bailed out by the European Union. This is going to be the event that rocks the boat. The German citizens are also going to grow tired of these bailouts for other nations. The European Union seems like a failed science project that is effecting millions of lives. The recent rally in gold, silver, and oil are telling us that the European Union is eventually going to be doomed.