The U.S. may have just lost its AAA rating — but at least there are still financially responsible U.S. companies left.
Two S&P 500 companies — Johnson & Johnson and Microsoft — are rated AAA by S&P Global Ratings. The U.S. lost its AAA rating from S&P years ago. And this month, it lost its AAA rating from Moody's — joining the other rating agencies to take the nation's credit down a notch.
"Both Fitch and S&P had already dethroned the U.S. credit ratings from perfect ratings in 2023 and 2011, respectively. To be sure, unsustainable fiscal spending is not a new or unknown market reality, but recent deficit projections are pressuring Treasury yields and the U.S. dollar," said Paul Beland, global head of research, wealth management, at CFRA.
Seeking Out Quality
Seeing the sinking creditworthiness of the U.S. is a bit of a wake-up call for investors. For years, the yield on U.S. debt was known as the "risk free" rate. But now there's more than a little added risk.
"The Moody's downgrade is unlikely to cause a major reckoning in the bond market given that fiscal unsustainability was known and largely priced in," Beland said. "However, more concerning remains the trajectory for growing national debt and the upcoming Treasury maturity block (+25% of the total outstanding marketable U.S. Treasury debt will mature in 2025)."
And that's why it's wise to know which S&P 500 companies are more highly rated than the good old-fashioned U.S. Shares of the 10 S&P 500 stocks with the highest S&P credit ratings are up an average of 2% this year. That's double the S&P 500's gain in that time.
But the good news doesn't stop there.
High Interest In AAA
Shares of the two S&P 500 stocks with AAA ratings are outperforming by large amounts this year. Shares of J&J are up 6.2%, and shares of Microsoft are up 8.4%. J&J has an RS Rating of just 44, but is trying to consolidate at 170. Microsoft, on the other hand, has an RS Rating of 83 and is approaching a buy point of 468 a share.
Interestingly, investors are starting to treat Microsoft with the same reverence formerly reserved for U.S. Treasuries. A Microsoft bond maturing in 10 years carries a yield of 4.61%, says Finra. That's only a hair higher than the 4.48% yield on 10-year U.S. Treasuries.
More and more, it seems investors need to redefine what they consider to be "safe."
Highest Credit Ratings On S&P 500 Stocks
| Company | Ticker | YTD chg | Sector | S&P Credit Rating |
|---|---|---|---|---|
| Johnson & Johnson | JNJ | 6.2% | Health Care | AAA |
| Microsoft | MSFT | 8.4% | Information Technology | AAA |
| Alphabet | GOOGL | -13.3% | Communication Services | AA+ |
| Apple | AAPL | -17.6% | Information Technology | AA+ |
| Amazon.com | AMZN | -7.1% | Consumer Discretionary | AA |
| Berkshire Hathaway | BRKA | 11.8% | Financials | AA |
| Costco Wholesale | COST | 13.0% | Consumer Staples | AA |
| Walmart | WMT | 8.2% | Consumer Staples | AA |
| Abbott Laboratories | ABT | 19.5% | Health Care | AA- |
| Accenture | ACN | -9.4% | Information Technology | AA- |
