What It Could Mean for Your Investments
I’m sure you saw the recent headline — Moody’s downgraded the U.S. credit outlook from stable to negative.
This isn’t a full credit downgrade, but it does raise concern about how the U.S. is managing its growing debt.
What’s a possible consequence?
An increase in Treasury yields. In simple terms, that means the government may have to pay more to borrow money.
It doesn’t guarantee that yields will rise, but it’s worth exploring how this could impact you as an investor — and what steps you can take to stay financially grounded.
If Treasury Yields Continue to Rise, What Happens?
Treasury yields affect almost everything in the financial system. If they rise again, here’s what could be expected:
- Borrowing costs may rise for the government, businesses, and everyday people.
- Stocks, especially tech and growth stocks, historically drop in value when yields rise. This can present opportunities for young investors — but may be concerning for those within 5–10 years of retirement.
- Mortgage rates could increase, making home purchases more expensive. Homeowners with adjustable-rate mortgages may also see a rise in monthly payments.
- Existing bonds may lose value, since newly issued bonds could offer higher returns. This can hurt the conservative portion of your portfolio.
These outcomes aren’t guaranteed, but it’s better to be prepared than caught off guard.
How to Stay on the Safe Side
You don’t need to overhaul your portfolio — but a few smart moves can help reduce risk and maintain balance.
1. If Bonds Are in Your Portfolio, Reassess Them
Longer-duration bonds tend to lose value faster when yields rise. Consider safer alternatives:
- Short-term bond funds
- Treasury bills
- MYGAs (Multi-Year Guaranteed Annuities)
- Fixed annuities
Only MYGAs and fixed annuities offer contractual guaranteed rates.
2. Stick with Strong Companies
Review your stock allocations and rebalance your portfolio. Consider trimming high-risk positions and reallocating to companies that:
- Are profitable
- Have low debt
- Pay consistent dividends
- Generate strong free cash flow
Sectors like healthcare, energy, and consumer staples tend to hold up better in rising rate environments.
3. Keep Some Cash Handy
Cash has been earning solid interest and could continue to do so if yields rise. Keeping some funds liquid — in high-yield savings accounts, MYGAs, or short-term Treasuries — provides:
- Flexibility
- Security
- Decent return with low risk
Having cash or “dry powder” available also allows you to act on investment opportunities when they arise.
4. Stay Diversified
Diversification remains the most reliable strategy in uncertain times. Spread your investments across different asset types, such as:
- Stocks
- Bonds
- Annuities
- Commodities
- REITs
- Cash value life insurance
The goal is to limit downside exposure by holding non-correlated assets across various sectors. You don’t have to predict the future — just prepare for a range of outcomes.
Final Thoughts
Moody’s change in the U.S. credit outlook doesn’t mean it’s time to panic — but it is a reminder that even the U.S. economy is not immune to change.
Whether yields rise or not, the smart move is to review your financial plan, manage risk, and ensure your portfolio aligns with your goals.
If you’d like help thinking through what this means for your investments or your retirement, we at Income & Estate Planning Partners are always here for a conversation.
About the Author
Jacob Lewis is a licensed life insurance broker with Income & Estate Planning Partners, specializing in helping professionals and entrepreneurs create streams of guaranteed income and build lasting legacies. With a focus on income longevity and life insurance planning, Jacob works closely with clients to develop strategies that safeguard their assets and support their long-term financial goals. He is committed to providing personalized solutions that offer peace of mind and financial security.
About Income & Estate Planning Partners
At Income and Estate Planning Partners, we help individuals and families take control of their financial futures through thoughtful, customized strategies. Our team specializes in income planning for retirement, tax-efficient investment solutions, and estate planning designed to protect your legacy. With a planning-first approach, we work to simplify complex financial decisions so you can feel confident about the road ahead. Whether you’re preparing for retirement, navigating major life changes, or planning for future generations, we’re here to walk alongside you every step of the way.
Disclosure
The information provided in this article is based on sources believed to be reliable; however, accuracy and completeness cannot be guaranteed. This content is for general informational purposes only and is not intended to provide specific legal, tax, or investment advice. Please consult with a qualified legal or tax advisor regarding your individual circumstances. Nothing in this material should be interpreted as a recommendation or solicitation to buy or sell any security.