While U.S. corporate earnings will likely improve modestly, we expect further credit deterioration, particularly at the lower end of the ratings scale. Borrowing costs look set to remain elevated and weigh on corporates' ability to service debt and refinance. Telecom, health care, chemicals, consumer products, and retail and restaurants have the highest net negative bias, suggesting a gloomier ratings outlook. The commercial office sector is also under intense pressure. The U.S. will likely avoid a near-term recession and settle into a "soft landing", but recession risks remain. Labor cost pressure and supply chain constraints could linger.