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JP Morgan sees minimal long-term impact

Last Updated 08 August 2011, 16:09 IST

The downgrade of the country’s AAA credit rating is expected to have a spill-over effect on the financial system, from mortgages to banks to markets, which rely on US Treasuries for collateral.

Despite mounting stress in euro zone sovereign credit markets, the US economy is still on its way to recovery with the July labour report showing reasonable momentum, JP Morgan chief US equity strategist Thomas Lee said.

“Corporates have gained significant credibility against sovereigns, and given their impressive gains (share of GDP) argue for lower equity risk premia and thus, we expect equities to regain traction following a return of visibility on sovereign debt markets,” Lee wrote to clients.

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(Published 08 August 2011, 16:09 IST)

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