Rogoff Sees World Wishing It’s America Year After S&P Downgrade

Downgrades don't matter, it seems.

Aug. 6 (Bloomberg) -- Global investors can’t get enough American securities a year after Standard & Poor’s Corp. downgraded U.S. government debt.

The dollar has outperformed its peers in the past 12 months, rising by 10 percent against a basket of six currencies. U.S. stocks have been the best performing equity market in terms of dollars, with the Dow Jones Industrial Average advancing 14 percent. Treasuries also have done better since the S&P action late on Aug. 5, 2011, returning 6.7 percent to investors compared with 6.1 percent for other government bonds.

“Credit ratings are an opinion on relative risk of default, not a prediction of market behavior,” he said in an e- mail. “We began downgrading Greece in 2004 and Italy in 2005 for example, but for several years markets continued to value their bonds nearly on par with those of Germany.”

U.S. businesses are benefiting from the rush into American securities by global investors. Fifteen of the top 20 companies worldwide in terms of market capitalization are American, led by Apple Inc. and Exxon Mobil Corp., according to data compiled by Bloomberg. That’s up from 11 a year ago. New to the top 20 from the U.S. are Coca-Cola Co., Wells Fargo & Co., Procter & Gamble Co. and Pfizer Inc.

That’s double the rate of Germany and more than five times that of France. It’s also better than the U.K. and Italy, both of which are mired in recessions. Among the Group of Seven industrial nations, only Canada and Japan, which has been recovering from the ravages of the March 2011 earthquake and tsunami, grew more.

“The U.S. is the best-looking horse in the glue factory,” said Nariman Behravesh, chief economist in Lexington, Massachusetts, for IHS Inc. “We have our problems, but the rest of the developed world has far, far worse problems.”

On its own, S&P’s downgrade doesn’t seem to have mattered, with Treasury yields down and the stock market up, said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co. in Newport Beach, California. Even so, the market moves should be seen against the backdrop of record monetary stimulus from the Federal Reserve, which has helped hold down yields, and the crisis in Europe, he said.

‘Massive Outflows’

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