Investors shoot down prospect of full US downgrade

Investors have said it is unlikely a full-blown downgrade of the US will take place in the next few years following yesterday's move by S&P.

The ratings agency sent markets tumbling after it slashed its US outlook from stable to negative, the first time it has done so for 70 years.

S&P said a lack of a clear plan on how to tackle the country's fiscal deficit was its main concern.

The move means there is a one in three chance S&P will now cut its AAA-rating on the US, but managers said they did not expect this to happen in the foreseeable future.

Tim Roberts, North America fund manager at Cavendish Asset Management, said: "It is unlikely the S&P will downgrade US debt over the coming years.

"The US will continue to be able to repay its debt, and will eventually get it itself back onto a firmer fiscal footing."

Ted Scott  (pictured), F&C Investments' director of global strategy, added: "The downgrade is only in the outlook and is unlikely to lead to a cut in the rating itself.

"Indeed, it should focus the mind of the politicians of all parties to agree a credible debt reduction plan now that the clock is ticking on its debt rating."