Economies have avoided major pitfalls since the pandemic, helping borrowers partly offset, or at least postpone, the major headwinds from rising rates. Defaults have picked up in 2023 and will increase into next year among weaker borrowers. Investment-grade ratings can better absorb higher borrowing costs and are expected to see relatively muted credit deterioration ahead, though real estate could see some downgrades. Persistent core inflation, a drawn-out period of high rates, and slower growth will challenge weaker-rated corporates and emerging markets. A more severe economic downturn, a longer-than-expected period of high rates, geopolitical events, and challenges for China could derail our base case and lead to weaker business activity and market liquidity when large 2025 maturities loom.