4Q2025 Global Credit Outlook: Still climbing the ‘wall of worry’

Key takeaways

•  Macro: While U.S. growth has moderated from the above-trend pace of 2021-2024, it is ‘supportive enough’ to sustain resilience in risk assets, in our view. This should translate into normalizing monetary policy from the Fed, not a deep easing cycle. We see scope for a convergence between U.S. and European growth.
• Liquid credit: We continue to see an opportunity cost in being too defensive and remain comfortable selectively moving down in credit quality, given solid corporate fundamentals. We prioritize income and carry over duration exposure, given our rates view.
• Private credit: The structural growth drivers behind this asset class remain in place, and episodic market volatility is likely to further expand the addressable market of borrowers seeking a private financing solution. Similar to liquid credit, the fundamental signals are encouraging, in aggregate, albeit with some visible dispersion. This underscores the importance of credit selection, underwriting and workout expertise.
• Commercial real estate (CRE): Pricing has stabilized across even the most challenged sectors, and investors appear to be embracing an environment of structurally higher interest rates. This should support further momentum in transaction volumes, as well as the refinancing of CRE loans (scheduled and recent extensions).
• Risks to our view: A sharp downturn in global growth and severe deterioration in corporate profit margins are the key downside risks. Upside risks include an above-trend pace of economic activity, bolstered by a combination of consumer spending and business investment.

Past commentary

• 3Q2025
• 2Q2025
• 1Q2025