This fall marks the fifth anniversary of some of the darkest days of the 2008 financial crisis. That September 15th, the venerable investment banking firm of Lehman Brothers filed for bankruptcy, triggering a 5% one-day drop in the Standard & Poor’s 500 Index. By October 10th the S&P was down another 25%, just the midpoint of a slide from its previous peak in 2007 to its low close March 9, 2009. As the lads from Liverpool might say, “… that was yesterday, and yesterday’s gone.”
Gone perhaps, but not forgotten. So it’s nice to hear a little good news. For instance, Institutional Investor’s latest semi-annual assessment of global sovereign credit worthiness showed some improvement. Credit scores for 179 countries reviewed averaged 44.6 on a scale of 100, still shy of the pre-crisis high of 48, but moving in the right direction. And the big gainer among developed nations was the good old USA, rising 2.5 points to 91.3 and jumping from 12th to 8th place.
You may recall that just two years ago Standard & Poor’s was downgrading U.S. Treasury debt from AAA to AA+. That was near the end of a political tussle over the federal budget and raising the government’s debt ceiling. Stocks were taking a hit; pundits were predicting higher borrowing costs for Uncle Sam; and the feuding politicos were passing the budget morass to a “blue ribbon” commission. Over the ensuing two years stocks mostly rose, federal borrowing costs mostly fell, that blue ribbon commission was mostly ignored, and the deficit has been cut in half. Go figure.
By the way, if you wonder which countries garnered a higher credit score than the U.S., the top seven are Norway, Switzerland, Sweden, Canada, Germany, Singapore, and Finland. But hey, we’re right on Finland’s heels. With another year of gridlock in D.C., maybe we can pass the Finns and make Singapore sweat a little!