Ok, hear me out. If I’m not mistaken (and I may be because I don’t feel like doing a ton of research for a Reddit post lol) stocks took a pretty big hit when the US lost its first AAA rating. Less so with its second. With the third, you may think “meh, it doesn’t matter anymore”. However, I would imagine there are major institutional investors (pensions, endowments, maybe even countries) who have rules dictating the proportion of AAA rated debt. And perhaps those institutions could make the argument that “well, as long as one of the big 3 maintains a AAA rating, then it qualifies…” but now it no longer does. First, does it work like this? Second, if so could this trigger a wave of institutional selling that has deleterious effects on US borrowing costs, and by extension, stock prices?
Edit: ok, a few folks have chimed in that it doesn’t work like that. I know there HAS to be internal policies for institutional investing related to risk levels of holdings - if not actual laws or bylaws - so if it “doesn’t work like that” could someone give a bit more info on how it does?