CROSS-SECTORSECTOR COMMENT 4 January 2017ContactsBenjamin 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 TwitterMarket CommentGlobal Rating Outlook Lacks Vigor Moodys Investors Services warnings of future credit rating actions are showing marginal improvement in the prospects for corporate credit quality in 2017. A limited acceleration in global economic growth will be conducive to fewer rating downgrades and defaults. Yet rating upgrades will also be hard to come by as business sales growth will be restrained, leaving borrowers to rely on cost controls to improve their balance sheets. Sustaining and building on gains in commodity prices will be the crucial factor in moderating the incidence of credit distress in the quarters ahead.Moodys 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.MOODY'S ANALYTICS CROSS-SECTORMoodys rating outlooks neither hot nor cold Among industrial sectors across the globe, the outlook for profit growth is largely positive but modest. We see this in the nonfinancial sector outlooks from Moodys, which describe likely business conditions over the next 12 to 18 months. At the end of the fourth quarter, 69% of sectors are classified as having stable outlooks as opposed to either positive or negative (Figure 1). This stability equals the high of the past five years, as sectors with negative outlooks slid to the nine-quarter low of 16% after peaking at 25% at the end of the second quarter. Sectors with positive outlooks, at 15%, are less than the negative share, as industries with potential sales growth next year in excess of 4% are few and far between.The mix of industries with positive and negative outlooks points to the weakening of broad trends that both boosted and hindered credit market performance (Figure 2). In the wake of the collapse in the price of oil and other commodities that fed into numerous bank...
