S&P Global — 10 December 2024
Daily Update: December 10, 2024
Anticipated Policy Changes Obscure US Credit and Economic Outlook
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
US markets are attracting record levels of investment as equity and fixed income investors show continued confidence in the country’s economic strength. Topline indicators for the US economy continue to show growth. Most economists project that this growth will continue to be strong into next year. The country’s recovery from high inflation remains the envy of the developed world. Positive ratings trends continue, and debt defaults are projected to drop in 2025. The incoming Trump administration has signaled that the financial and energy sectors can expect reduced regulation during the next four years. On paper, everything is looking pretty good for the US economy.
But uncertainty remains due to broad and sweeping policy changes anticipated under Donald Trump. Economists at S&P Global Ratings project that some of the policies announced during the president-elect’s campaign could have inflationary effects.
Assuming an increase in tariffs against large trading partners such as China, Canada and Mexico, consumer prices would be materially higher in the first 12-18 months of tariff implementation. This would represent a one-time shift in prices, rather than an ongoing inflationary effect. However, higher inflation would likely delay or even possibly reverse the Federal Reserve Bank’s current policy easing. S&P Global Ratings now forecasts that the federal funds rate will reach 3.5%-3.75% by the end of 2025 (versus 3.0%-3.25% in its previous outlook). Under this revised scenario, the assumed neutral rate of 3.1% will not be reached until the fourth quarter of 2026, rather than the fourth quarter of 2025, as was previously projected.
S&P Global Ratings expects GDP growth in the US to come in at 2.3% on a year-end basis for 2024, with an average annual real GDP growth forecast of 2.0% for each of 2025 and 2026. The risks to that projection include higher interest rates, retaliation from trading partners regarding higher tariffs and souring investor sentiment.
Any slowing of the current policy easing from the Fed would impact borrowing costs, and that would be felt mostly at the speculative end of the ratings scale, according to S&P Global Ratings. Investors would demand a higher risk premium, and borrowers would face more challenges servicing debt or refinancing.
Among the risk factors that appear to be worsening, tariffs that ignite inflation and lower credit quality are a major concern. Others include geopolitical conflict, elevated borrowing costs, problems in the commercial real estate market, cyberattacks and physical asset risk due to climate.
Despite all this, the US economy appears set to expand, and corporate default rates are likely to slow. The outlook is positive, but the impacts of policy changes will take some time to become clear.
Today is Tuesday, December 10, 2024, and here is today’s essential intelligence.
Navigating the Clean Energy Transition: Market Dynamics and Performance Insights
The clean energy sector has undergone an extensive transformation over the past two decades, driven by a confluence of technological advancements, policy initiatives and heightened awareness of climate change. This paper explores the critical dynamics shaping the clean energy transition, emphasizing the role of international agreements such as the 2015 Paris Agreement, which has encouraged global efforts to reduce greenhouse gas emissions and promote clean energy adoption.
—Read the article from S&P Dow Jones Indices
Stock Market 'Fear Gauge' Plunges; Investors Expect Rally to Persist into 2025
A key measure of fear in the stock market has fallen to its lowest levels in months even as questions about the incoming Trump administration swirl, geopolitical uncertainty stays elevated and the economic path forward appears to filled with hurdles. The CBOE Volatility S&P 500 Index (VIX), also known as the market's "fear gauge," dropped this week to its lowest point since July, a sign that investor fear has abated as the stock market repeatedly touches record highs.
—Read the article from S&P Global Market Intelligence
CreditWeek: What are the Biggest Risks to Global Credit in 2025?
As we look toward 2025, S&P Global Ratings sees a year of promise and peril. The descent in key interest rates and resilience in many major economies may deliver on the promise of more favorable credit conditions. However, intensifying geopolitical and trade tensions increase the peril present in an already tumultuous environment.
—Read the article from S&P Global Ratings
Geopolitics: How Will Markets Navigate Ongoing Geopolitical Risks?
After half of the world's population voted in 2024, the coming year is shaping up to be a year of policy uncertainty. Forthcoming decisions by new governments could heighten market volatility. Former President Donald Trump's successful bid to return to the White House means geopolitical, trade and fiscal policy choices are all in play and are likely to be the most impactful election outcomes for the global agenda. The 2025 election calendar appears lighter, with less than 15% of the global population going to the polls next year.
—Read the article from S&P Global Ratings
India's Upstream Policy Overhaul, Windfall Tax Removal Likely To Draw In Global Oil Companies
India's move to broaden the scope of its exploration policy beyond petroleum and natural gas while abolishing a windfall tax on domestically produced crude oil will likely draw in private and foreign entities to the upstream sector, which has witnessed an uneven growth trajectory over the past decade.
—Read the article from S&P Global Commodity Insights
Power Conferences Dominate NCAA Media Landscape
The landscape of US college sports has shifted dramatically, with power conferences consolidating into four major leagues. The Big Ten and SEC have emerged as the premier conferences, bolstered by lucrative media deals. The Big Ten's recent agreement, valued at over $8 billion for seven years, marks the largest in college sports history, while the SEC's new $3 billion deal with ESPN enhances its media dominance.
—Read the article from S&P Global Market Intelligence
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