What Moody’s U.S. Credit Downgrade Means for Wealth Managers in 2025
Published May 20, 2025 – 
By Paul Beland, Global Head of Research – Wealth Management
On May 16, 2025, Moody’s officially downgraded the U.S. credit rating from Aaa to Aa1, marking a significant shift in the perception of U.S. fiscal stability. While not the first downgrade, S&P acted in 2011 and Fitch followed in 2023, Moody’s move carries weight. It underscores growing skepticism around the U.S. government’s ability to manage its long-term debt obligations and avoid fiscal deterioration.
For wealth managers, this downgrade isn’t just a headline it’s a signal to reevaluate fixed income strategies, Treasury exposure, and currency risk. CFRA’s new report, Concerning Fiscal Outlook, dissects the market impact of the downgrade and offers practical guidance for advisors navigating this evolving macroeconomic environment.
Surging U.S. Debt and the “Treasury Tsunami” of 2025
The downgrade comes as the national debt surpasses $36 trillion, with annual deficits still exceeding $2 trillion. More troubling is the concentration of debt coming due: over $9 trillion in Treasuries will mature in 2025, creating what CFRA refers to as a “Treasury Tsunami.”
This massive refinancing wave could destabilize the bond market, particularly if demand for new debt issuance weakens or interest rates rise further. The Treasury will likely issue more than $10 trillion in new bonds this year, a level of supply that could overwhelm even the most liquid fixed income markets.
“We expect this dynamic to continue to drive volatility in the Treasury market and put upward pressure on yields.”
– Paul Beland, CFA, CFRA Global Head of Research
Longer-dated maturities are especially vulnerable to these pressures. That’s why CFRA recommends advisors consider shifting toward intermediate-term Treasuries (3-, 5-, and 7-year notes), which offer lower duration risk and more attractive reinvestment flexibility in a rising rate environment.
Debt Monetization and the Federal Reserve’s Shifting Role
As deficits swell, attention is turning back to the Federal Reserve—not just as a lender of last resort, but as a potential buyer of last resort. The Fed began monetizing debt during the 2008 financial crisis and expanded those efforts in 2020. While the central bank is currently in a quantitative tightening phase, CFRA believes this may reverse if bond market dysfunction or recession risk escalates.
Potential triggers for renewed debt monetization include:
- Treasury auction failures or declining foreign participation
- A sharp economic slowdown requiring accommodative policy
- Inflation shocks from tariffs or supply-side disruptions
“Debt monetization isn’t theoretical—it’s a tool the Fed has used before and may need again.”
– Paul Beland, CFA, CFRA Global Head of Research
Such policy shifts could reintroduce inflationary pressure and weaken the U.S. dollar. Advisors should remain alert to Fed commentary, especially regarding balance sheet expansion, which could send clear signals about future yield curve movements.
U.S. Dollar Stability and the Global De-Dollarization Trend
Despite its continued role as the world’s dominant reserve currency, the U.S. dollar is showing signs of slippage. The dollar’s share of global reserves has declined to 57.8%, down from over 70% in 2001. Meanwhile, the U.S. Dollar Index (DXY) is down nearly 10% year-to-date, decoupling from its historical relationship with rising Treasury yields.
This divergence reflects growing concerns about the U.S.’s fiscal position and the global appetite to diversify away from dollar-denominated assets. Though no immediate competitor exists, the euro and yuan each carry their own structural weaknesses. The long-term trend of de-dollarization is gaining slow but steady momentum.
Wealth managers should monitor this shift closely, as further erosion in dollar demand could:
- Reduce the U.S.’s ability to borrow cheaply
- Increase currency volatility
- Alter capital flow dynamics across global markets
CFRA’s report dives deeper into these currency risks and provides scenarios to help advisors prepare client portfolios for shifts in global reserve behaviors.
Prepare for What’s Next with CFRA Macro Research
In today’s volatile policy and credit environment, wealth managers need more than headlines, they need actionable insights backed by rigorous macroeconomic analysis. CFRA’s Concerning Fiscal Outlook report provides a deeper look at the implications of Moody’s downgrade, surging Treasury issuance, and the evolving role of the Fed.
📥 Download the full report – “Concerning Fiscal Outlook”
→ Get strategic allocation insights and macro guidance to help protect client portfolios through the remainder of 2025.
