Fitch Ratings reports that global credit conditions remain tilted toward downside risk, citing slowing economic growth, volatile U.S. trade policy, and persistent geopolitical instability.
While these factors weigh on the macro outlook, economic data and financial markets in 2025 have remained stable, showing no significant signs of contagion from short-term disruptions.
Issuer ratings have shown limited negative momentum so far. Investor sentiment has held firm, supported by strong consumer activity in the U.S., a temporary pause in tariffs announced in April, and quick resolutions to several geopolitical flashpoints.
These developments sustained market liquidity and supported risk appetite through the first half of the year.
High-yield credit spreads remained near historic lows, while global equity markets delivered strong performance in 1H2025.
However, signs of volatility began to emerge. Risk-off sentiment surged following broader-than-expected U.S. tariff announcements, triggering a sharp but short-lived decline in valuations and a widening of credit spreads.
Markets have since recovered, but the weakness in the U.S. dollar—down 10% against the euro in 1H2025—suggests investor expectations of slower U.S. growth.
Mid-year adjustments to Fitch’s sector outlooks reflect a more cautious stance. The share of sectors and structured finance assets with a “deteriorating” performance outlook rose to 29%, up sharply from just 10% at the start of the year.
This shift signals worsening expectations for operating conditions and credit fundamentals into 2025.
Fitch concludes that while markets remain resilient in the face of short-term shocks, structural vulnerabilities and policy uncertainty continue to shape a challenging environment for global credit.
