CROSS-SECTORSECTOR COMMENT 12 April 2016ContactsBenjamin S. Garber 1.212.553.4732 Asst Dir-Economist benjamin.garber@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research,Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products.For further detail, please see the last page.Market CommentDivergent Outlooks to Global Credit Even a hint of relief to the extended pullback in US trade and manufacturing activity could improve the performance of global corporate debt. Yet the extreme distress of all industries tied to the global commodities market warns that future credit rating actions will skew towards downgrades. More broadly, persistent earnings growth could narrow credit spreads, but profits will not be robust enough to restore the credit cycle to its previous heights.Sector rating outlooks have swung negative In the face of slowing global growth and last years dollar strength, many industries are facing lower income trends that imperil their credit ratings. In the last quarter, negative rating outlooks among nonfinancial sectors as identified by Moodys Investors Service outnumbered positive outlooks for the first time in almost three years (Figure 1). Such outlooks aim to describe general business conditions for a given sector over the next 12 to 18 months. Of the outlooks for 53 global and regional sectors, 25% were negative and only 15% were positive. This demonstrates a turning point in the credit cycle by reversing the distribution of outlooks that held over the previous ten quarters, where the positive outlook share exceeded the negative share by an average of 22% to 13%.MOODY'S ANALYTICS CROSS-SECTOR2 12 April 2016 Market Comment: Divergent Outlooks to Global CreditMOODY'S ANALYTICS CROSS-SECTOR3 12 April 2016 Market Comment: Divergent Outlooks to Global CreditIt will come as no surprise that the sectors with negative outlooks are connected to the raw materials trade (Figure 2). Of the 13 industry groupings facing ...
