Two-thirds of global investors polled in a new Bloomberg survey agree Standard & Poor’s was justified in issuing the U.S. credit downgrade on Aug. 5. Among the investors who showed the greatest support for the downgrade were those located in Asia and Europe.
75 Percent of Overseas Investors Support U.S. Credit Downgrade
In August 2011, Standard & Poor’s surprised many by downgrading the U.S. debt rating from AAA to AA+, a move not replicated by any other credit rating agency. The downgrade was largely prompted by the agency’s dislike of Congressional disagreements that pushed the national debt dangerously close to default.
S&P received a lot of backlash for the downgrade as it contributed to stock market losses that left shareholders $1 trillion poorer by Aug. 25.
Bloomberg recently conducted its global poll to assess how investors worldwide felt about the downgrade a couple of months later. Of the 1,031 subscribers surveyed, 67 percent of U.S. investors approved of the downgrade, while three-fourths of respondents in Europe and Asia agreed that the downgrade was the right choice.
Investors Say U.S. Credit Downgrade Warranted Due to Crippled Politics
A number of investors believe the downgrade was warranted because of the crippled U.S. political process. Otto Dichtl, a banking analyst and managing director at London-based Knight Capital Europe Ltd., said in the Bloomberg poll, “If you debate to the last day whether you default or not, it’s not a triple-A credit.”
While many investors backed the credit rating downgrade, more than half overall still rated the nation’s creditworthiness as good or excellent.
By region, U.S. investors were more favorable about creditworthiness, with 72 percent rating it as good or excellent. On the other hand, only 45 percent of Europeans and 42 percent of Asians felt the same way.
As for whether credit rating agencies are to be trusted, only 1 percent of investors said the grades given by the firms are very reliable and 18 percent said they were fairly reliable. A whopping 80 percent said they were either somewhat reliable or not reliable at all.
