S&P Global Ratings expects slowing growth ahead and diverging credit performance. Investment-grade entities should remain resilient and more financially flexible while higher rates will continue to challenge those at the lowest end of the rating spectrum. This divergence is reflected in our negative bias, at 9.2% for investment grade and 35.4% for 'B-' and lower ratings. The full impact of sharply higher interest rates has yet to unfold. Defaults have picked up in recent months in light of increasing interest rates--a process we believe is going to continue to erode debt-servicing capacity for many lower-rated issuers. We forecast default rates to rise to 4.25% in the U.S. and 3.6% in Europe by spring 2024. Within emerging markets, we expect an increase in defaults from Latin America. Downside risks remain high. After avoiding numerous potential dangers so far in 2023, it is easy to have a false sense of calm. But, we believe that most of the downside risks to credit conditions remain.