Our chart of the day comes to us today via Bloomberg, looking at YTD performance of McGraw-Hill (parent co of S&P), Moody’s, and the S&P500 Index.
David Wilson observes:
“McGraw-Hill and Moody’s face two threats because S&P cut the U.S. government to AA+, Appert wrote yesterday in a report. The first is greater regulatory scrutiny of the rating industry, which has been criticized for flawed assessments of mortgage-backed securities during the past decade’s housing bubble.
“The perception in Washington that the rating agencies have too much power and must be ‘reined in’ will undoubtedly by reinforced by S&P’s decision,” he wrote.
The second risk is that bond sales may become more volatile as the lower rating helps slow economic growth, the report said. Assuming that occurs, revenue and earnings at McGraw-Hill and Moody’s would become less predictable as well.
As the chart above shows, the index has outperformed the two public rating agencies . . .
McGraw-Hill, Moody’s Risks Rise After S&P Cut: Chart of the Day
Bloomberg, August 09, 2011