U.S. Outlook Revised by Standard and Poor’s as Economic Stability Improves

Standard & Poor’s ratings services revised its United States outlook on June 10, upgrading it from negative to stable. The ratings agency rocked the markets in August 2011 when it downgraded the United States’ rating from AAA to AA+.

This month, however, S&P seemed cautiously optimistic that despite the government’s failure to address entitlement reform, the economy appeared to be regaining momentum slowly. According to MarketWatch, the Dow Jones Industrial Average at first reacted positively to the news, but later closed slightly down after a day of bumpy trading.

According to Forbes, one factor that may have helped S&P rethink the U.S. outlook is the news that Fannie Mae and Freddie Mac repaid billions of dollars in dividends to the government, a move that prompted the Congressional Budget Office to lower the projected debt. Policymakers are also making efforts to address entitlement spending and other government spending, both of which S&P views as favorable signs.

S&P states in its summary that some of the risks assessed in 2011 that led to its downgraded rating have receded to the point that the U.S. economy is expected to grow at a rate that will match its counterparts worldwide. The agency believes that the economy will not deteriorate in the near future, although unforeseen circumstances may change this outlook.

This news comes on the heels of an earlier announcement by the Federal Reserve of St. Louis that overall household wealth also appears to have rebounded from its lowest point during the recession in 2009. The latest figures show that household wealth, when adjusted for inflation, currently stands at $525,822. Although not yet nearing the pre-recession high of $582,299, it is yet another sign that things are improving, albeit more slowly than most people would like. The majority of growth came from improvements in the stock market and in home values.

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