US presidential election unlikely to have direct impact on corporate ratings: Fitch

ISTANBUL

The US presidential election in November this year is not expected to have a direct impact on American corporations’ ratings, according to Fitch Ratings. 

“Rating actions directly due to federal policy changes are rare,” the rating agency said Monday in a statement. “However, significant shifts in climate and social policies could have long-term effects, particularly for the auto, energy, healthcare and utility sectors.”

Fitch said all corporate sectors are exposed to varying degrees to changes in presidential administrations and the balance of power in Congress, noting that the federal government controls sweeping issues like corporate tax rates and anti-trust policy.

The agency noted that federal policies and regulations can dramatically influence some sectors’ ability to generate profits and cash flow, ultimately affecting asset valuations and capital deployment decisions.

However, since passing and implementing new legislation is a lengthy process, this gives companies time to adjust their business models to mitigate the effects of negative policy outcomes, it added.

Fitch believes corporate credit profiles under a Donald Trump administration would be most affected by trade protectionism, persistent fiscal pressures, climate policy rollback and social policy reform.

Geopolitics and foreign policy, financial deregulation and privatization, and restrictive immigration are also expected to affect US corporate credit indirectly, it added.

“A ‘red-wave’ election, where Republicans gain control of the White House and both chambers of Congress, would have the greatest likelihood of material revisions to existing policies on these matters,” it noted.

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