U.S. credit investors were more cautious on the economic outlook for the U.S. in the April Fitch Ratings/Fixed Income Forum survey than they were six months earlier. However, their expectations were much more optimistic than for the eurozone.
For the U.S., 84% of investors anticipated economic growth above 2% in the next 12 months but only 1% of those polled foresaw this outcome for the eurozone. Economic recovery in the eurozone was viewed as the second most important factorbehind improved labor market conditions - in supporting the credit markets and ensuring a sustained economic recovery in the U.S. Only 55% of survey respondents expected financial stability in the eurozone over the next year, down from 81% in September.
More than half of those polled thought the European Central Bank EUR1.1trn quantitative easing program would push back a U.S. interest rate rise by at least a few months. Separately, 53% expected the Federal Reserve to raise rates by 25bp before October, while the rest were evenly divided between a 50bp rise and no change.
Investors remained convinced that corporate leverage would rise modestly rather than fall. They believed that companies will primarily spend their cash on shareholder-biased activities such as share buy-backs, M&A and dividends - as exemplified recently by Oracle (A+/Stable) and Amgen (BBB/Negative).
The Fitch Ratings/ Fixed Income Forum April investor survey addresses investors' views on the significant risk factors facing the U.S. credit markets, the factors for ensuring a sustained U.S. economic recovery, as well as the general economy.
