The risk to economic activity and corporate bottom lines in the months ahead is largely to the downside, says Fitch Ratings.
In a research note, the rating agency suggested that the downside risks to its base case are more significant than the upside risks.
In short, the agency sees the threat of a relapse in the economy as a more likely prospect than a faster-than-expected recovery.
“Consumer and corporate sentiment have been badly damaged. Just the possibility of further unpredictable resurgences will weigh down prospects for meaningful and — importantly — sustained improvement in confidence,” it said.
Against this backdrop, Fitch doesn’t expect ratings to stabilize this year where ratings facing negative outlooks.
Currently, more than one third of corporate credit ratings have a negative outlook, or are under a negative rating watch, it said.
Fitch noted that, historically, 50% to 60% of these ratings will experience further downgrades in the following 12 months.