Stay in US funds if horizon exceeds seven years, exposure less than 20%

If you are worried about a US-only exposure following the downgrade of US government debt, go for a globally diversified fund

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The fixed-income market reacted to the downgrade, with the 30-year Treasury yield rising above 5 per cent as investors demanded higher returns for perceived risk.

Sanjay Kumar Singh Karthik Jerome New Delhi

5 min read Last Updated : May 25 2025 | 9:22 PM IST

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Moody’s Investors Service downgraded the United States (US) government’s credit rating from AAA to AA1 on May 16, 2025. This has sparked concern among Indian retail investors who have diversified globally, with many questioning whether to maintain, reduce, or exit their US fund holdings.

Why the downgrade happened

The downgrade stems from the US’s widening fiscal deficit and elevated debt-to-GDP ratio. “The high level of debt-to-GDP ratio could make it difficult for the US to service its debt,” says Pratik Oswal, chief of passive business, Motilal Oswal Asset Management Company (AMC).

Moody’s was the last of the three major rating agencies to

Topics : Motilal Oswal Asset Management Fixed Income