A market indifferent to the Moody’s downgrade?It’s not something to take lightly.

Today, the market reaction to Moody’s downgrade of the U.S. credit rating was surprisingly calm. The Nasdaq ended slightly higher, and both the KOSPI and KOSDAQ showed limited volatility. During the session, the yield on the 10-year Treasury note surged to 4.57%, signaling a potential escalation of market stress, but later declined sharply, settling back within its previous range. It’s as if the market collectively decided that “this isn’t a big deal.” This muted response likely reflects the perception that the U.S. government—especially the Treasury and the Federal Reserve—is determined to prevent any form of market collapse. With a trade war against China on the horizon, Washington cannot afford to trigger a market shock right now.

However, the structural risks underlying this downgrade are far from resolved and could lead to delayed but compounding shocks in the months ahead. Several key developments point to this risk.

First, there's Trump's tariff timeline. Just a few days ago, he announced that in 2–3 weeks, the U.S. would unilaterally notify countries that are unwilling—or unable—to reach trade deals (e.g., many African nations) of their designated tariff rates. In other words, even before the 90-day grace period expires, the U.S. could reignite a global trade war. This would once again disrupt supply chains and add pressure to inflation.

Second, the debt ceiling issue looms. Serious negotiations are expected between mid-June and mid-July. As Moody’s noted, the real issue is the magnitude of U.S.

debt. If Congress fails to reach a timely agreement, the market could experience another wave of volatility, magnified by the lingering impact of the Moody’s downgrade. In that case, liquidity risk becomes a central concern.

Third, the 90-day tariff suspension—announced in early April—is set to expire in July. While the U.S. has reached an agreement with the U.K., talks with other key partners like South Korea and Japan have stalled. Both countries are facing upcoming elections (South Korea in June and Japan in July), making it unlikely that trade deals will be finalized before then. In short, the window for follow-up agreements is rapidly closing. Additionally, the U.S.–China 90-day tariff freeze will expire in August, potentially dragging the world’s two largest economies back into a confrontation.

Each of these events is significant in its own right. But if they unfold sequentially, the market may face a perfect storm:

Liquidity stress + Renewed inflation + Slowing growth

This is a toxic combination—one that neither the Fed nor the Treasury would be able to control effectively. For investors, such an environment would create serious pressure on asset prices across the board.

As we move toward July, the most prudent strategy will be to increase cash holdings and secure liquidity. This is a time not for offense, but for defensive positioning.