The global credit rating outlook is more negative now than it was a year ago across most rating sectors, but investment managers don’t appear overly concerned, suggests a new report from Fitch Ratings Inc.
“Investors and investment managers remain sanguine on credit,” the Fitch report says, “although they do recognize the risks facing the global economy and credit asset classes.”
Fitch compared its views on the credit environment with the opinions of selected major investment managers and the results of investor surveys. One thing they all agree on is that intensified political risks will lead to higher market volatility. “Fitch shares this view, identifying populism and trade protectionism as key risks,” the report says.
Similarly, Fitch reports that both the credit-rating agency and most investment managers believe inflation will rise as a result of higher commodities prices, U.S. wage increases and higher infrastructure spending. “However, some investment managers suggest that the re-inflation narrative is overdone,” it says.
Although it’s accepted that interest rates are due to rise, Fitch says that investment managers disagree on the likely pace of rate hikes.
In addition, Fitch reports that investment managers expect macroeconomic market conditions to improve and that they’re forecasting low default rates in 2017.