Last time around this led to reduced borrowing costs, so good news, I guess.
(Doesn't always happen like this, and may not have happened like this last time, but it's not uncommon)
The search term is "flight to quality", and Matt Levine was writing how it was a bit broken recently due to GOP messing around.
> Fitch Downgrade August 1 2023
> SPY around 455 fell to 433 from August 1 to August 18
> By October 27th SPY bottomed around 410 (-10%)
> From August 1 to October 23, US 10y yield went from 3.9% to 5%
Stocks went down and bond yields went up last time. The Federal Reserve raised the federal funds rate from 5-5.25% to 5.25-5.50% during the same time period.
Last time Treasuries were unambiguously a haven asset. That correlation was broken on Trump’s liberation day.
Altogether, I’d be surprised if this downgrade has a material impact on financial markets. It’s much more interesting for the House.