But the state’s money managers say those investments are still sound.
On Monday, the net loss was $117 million, according to Arizona State Treasurer Doug Ducey, although it rebounded Tuesday with a gain of $80 million.
Ducey said that the change was to be expected, adding that a loss isn’t really a loss until one sells.
“The value in the Permit Land Endowment Trust will change day to day depending on if the market goes up or down,” he said. “And certainly, it’s experienced that volatility in the market… But we have a very safe and well-diversified portfolio.”
Money invested by the state comes from the interest on the $3.2 billion Permanent Land Endowment Fund, which is funded by the sale of state trust land.
Last week, Standard and Poor downgraded the U.S. debt from AAA, the highest rating, to AA+, citing a lack of a sufficient long-term debt reduction plan from the federal government.
On Monday, the Dow was down 634 points, but rebounded on Tuesday, rising 429 points. On Wednesday, stocks plunged 519 points.
Ducey said that he doesn’t expect that the downgrade will have any other short-term effects on the state. The concern was always that the downgrade would drive up interest rates for consumers.
But money continued to flock to the Treasury despite the downgrade, keeping interest rates low.
“At this point, we’ve seen interest rates go lower, and that’s what the market sees,” Ducey said. “The market still sees U.S. government-issued debt as a sound value.”