Daily Update: Global Conditions Look Good For 2025, But Confidence Wavers

Today is Monday, December 9, 2024, and here’s your curated selection of essential intelligence on financial markets and the global economy from S&P Global. Subscribe to be notified of each new Daily Update. 

On paper, everything about 2025 looks good. Inflation has returned to target levels in most major economies, labor markets appear surprisingly resilient and consumer spending remains steady despite having eased back from a post-pandemic splurge. The global economy is projected to grow 3% next year, and the multiyear doubt about a hard versus soft landing has been settled definitively by a landing so cottony-soft it hardly seems like a landing at all.

Analysts and researchers at S&P Global Ratings recently published a global credit conditions report. At first glance, the news looks good. S&P Global Ratings’ credit cycle indicator appears to be signaling a credit recovery in 2025 on the back of a strong corporate sector, and credit defaults are forecast to decline. While the danger of default is higher for speculative-grade issuers than for investment-grade issuers, even the downgrade potential for speculative-grade debt is forecast to decline. Corporate earnings have steadily grown due to improved profit margins, rather than increased sales. Companies have also done a good job pushing out maturities through refinancing.

Despite this abundance of positive data, worries regarding geopolitics, trade, real estate, climate change and cyberattacks persist. S&P Global Ratings Global Chief Economist Paul Gruenwald cautioned readers to “buckle up” in his economic outlook for the first quarter of 2025.

The second Trump administration is at the top of the list of factors driving uncertainty for economic and credit conditions. Despite a burst of equity market euphoria following the US presidential election, President-elect Donald Trump’s policies regarding trade could create macroeconomic turbulence. Proposed tariffs on all imported goods, as well as additional tariffs on goods from Canada, Mexico and China, could have inflationary effects in the US and be damaging to some industries. This would create a drag on US GDP growth in the near term and lead to problems for industries with highly engineered products that depend on imported semiconductors and electrical components. US tariffs could trigger retaliatory tariffs from trading partners that would affect a range of industries.

The sudden toppling of former President Bashar Assad’s regime in Syria after 50 years of autocratic rule is another reminder that geopolitical forecasting is tricky. Continued armed conflicts in the Middle East and Ukraine pose threats to supply chains and create a drag on government budgets. While markets continue to be remarkably sanguine about geopolitical conflict in 2024, there remains a risk of conflicts spreading and affecting critical industries such as oil and energy.

Beyond the immediate credit conditions forecast, analysts and researchers at S&P Global Ratings posed a range of questions confronting the world in 2025. Uncertainties regarding the pace of interest rate drops, the austerity agenda in Europe, China’s lead in clean technologies and increasing AI demand create doubt in an otherwise sunny macroeconomic picture.

Today is Monday, December 9, 2024, and here is today’s essential intelligence.

Written by Nathan Hunt.

Sustainability

Latin America's Road to Net Zero

In the global move toward reducing greenhouse gas (GHG) emissions and boosting renewable energy sources, regional considerations are crucial. While the EU aims for net-zero emissions by 2035, Brazil and China have set targets to reach approximately 100 g/km of CO2 by the same year, with the US targeting 50 g/km.

—Read the article from S&P Global Commodity Insights

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Economy

Fed Likely to Cut Rates Again This Month as 2025 View Grows More Cloudy

The US Federal Reserve appears likely to lower benchmark interest rates again later this month after cutting interest rates at its previous two meetings. The central bank's plans for rates in 2025 are anyone's guess. The Fed is due to update its quarterly economic projections at its next meeting Dec. 17–18. In their latest quarterly projections, released in September, members of the rate-setting Federal Open Market Committee held a median view of the central bank's benchmark rate ending 2025 at 3.4%, or 125 bps of cuts from current levels.

—Read the article from S&P Global Market Intelligence

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Capital Markets

Regulators Eye Private Debt Boom in Europe

Disintermediation in Europe is taking an important step forward. Private lenders, who have been active in the mid-market in Europe for years, took full advantage of tighter funding conditions over the past two years as interest rates rose and banks' lending appetite reduced. This coincided with a transformation of the financing sector that resulted from a confluence of structural factors.

—Read the article from S&P Global Ratings

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Global Trade

Global Trade: How Might Uncertain Trade Policies Affect Macro-Credit Conditions in 2025?

Trade protectionism has been rising globally in recent years, as is the risk for more, rather than fewer, of these policies in 2025. Tighter restrictions on global trade often have a negative impact on real GDP growth and could weaken financial conditions if they materially increase inflation and, consequently, interest rates.

—Read the article from S&P Global Ratings

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Energy & Commodities

Listen: CERAWeek Podcast | Season 2 | Ep. 05 — Advanced Nuclear Technologies: Driving Economic Viability and Sustainability in Energy

In this episode of the CERAWeek Podcast, host Atul Arya, S&P Global chief energy strategist, welcomes Jacob DeWitte, co-founder and CEO of Oklo. As the world seeks clean and sustainable energy solutions, this discussion delves into the transformative potential of advanced nuclear technologies and their role in navigating the evolving energy landscape. Join us as we discuss the potential for next generation nuclear technologies and to continue setting the stage for CERAWeek 2025, where industry leaders and policymakers will gather to shape the future of energy.

—Listen and subscribe to the podcast from S&P Global

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Technology & Innovation

2025 Offers 'Window Of Opportunity' for Tech Deals – KPMG

KPMG LLP anticipates a surge in tech M&A and IPOs in 2025, driven by favorable market conditions. During a media roundtable, the US audit, tax and advisory firm's technology sector leaders cited a robust equity market, improved financing options and a renewed focus on growth as key factors expected to boost deal activity over the next year. Beyond 2025, the outlook becomes less certain. KPMG is assessing how President-elect Donald Trump's policies on tariffs and immigration could influence inflation and interest rates, potentially impacting longer-term deal flow.

—Read the article from S&P Global Market Intelligence

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Events & Webinars

Webinar: Beyond ESG with the Outlook for Climate-Related Policies Post-US Election (Dec. 11, 2024)

Under the forthcoming US administration, S&P Global Commodity Insights expects that climate-related energy policy within the United States is likely to continue along the seesawing path it has followed over the past eight years, seeing rapid swings in the federal regulatory landscape and approach to international climate policy.

Join S&P Global Sustainable1 in our upcoming Beyond ESG webinar as we bring you specialist perspectives digging into the details of climate-related policies, reflecting on COP29 and looking ahead to the outlook post-US election.

—Register for the upcoming webinar from S&P Global Sustainable1

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