The Big Picture
2018 Global Credit Themes

The Big Picture presents research on six themes shaping credit in 2018: Growth, Financial Stability, Political & Geopolitical Risk, Technology & Innovation, Climate Change & Sustainability, and Demographics.

Explore our Credit Themes
Growth
Financial
Stability
Political &
Geopolitical Risk
Technology
& Innovation
Climate Change
& Sustainability
Demographics
launch credit themes video
Highlights
US PUBLIC FINANCE
/
2
November
2018
Podcast: Changing US demographics present credit risks and opportunities
In this inuagural edition of Moody’s Talks US Public Finance, Managing Director Alexandra Parker and Senior Vice President Naomi Richman discuss the credit implications of changing demographics in public finance, focusing on four principal factors: Age of population, labor force participation, urbanization and income distribution.
Highlights
Cross-Sector
/
11
October
2018
Escalating trade tensions will have unintended consequences for supply chains
In our latest Global Trade Monitor, we discuss how a prolonged US-China trade dispute is now more likely. Although our baseline scenario assumes that the tensions will have a manageable impact on global growth and inflation, a large decline in investment or financial markets could derail the current momentum.
Highlights
Financial Institutions
/
25
September
2018
Podcast: Big tech a real threat to financial firms in retail services
In our central scenario, emerging competition from the non-bank digital ecosystems of innovative global technology firms will cause traditional financial firms to cede some control over the distribution of retail financial services. An alternate scenario could also emerge, in which big tech firms control a larger share of distribution and manufacturing, eventually leading to the displacement of a number of financial incumbents.
Growth
PUBLIC SECTOR EUROPE
/
5
November
2018
Positive 2019 outlook on French regional and local governments on solid economic growth

Our positive outlook for French regional and local governments (RLGs) in 2019 is supported by solid economic growth, stable debt and the 1.2% limit on RLGs’ nominal spending increases. We expect France's national GDP growth to reach 1.6% next year, which will provide additional revenue for RLGs.

CROSS-SECTOR
/
30
October
2018
Italian budget plan fails to provide safeguards for economic growth, a credit negative for domestic issuers

The lack of a coherent plan for structural reforms will negatively affect Italy's medium-term growth prospects and the credit quality of domestic issuers

FINANCIAL INSTITUTIONS
/
16
October
2018
United States: Flattening yield curve dampens regional banks' profitability prospects

Further flattening of the yield curve portends a possible setback for recent improvement in some US regional banks’ net interest margin, a credit negative because net interest income accounts for about 60% of these banks’ net revenue. But banks have some defenses, foremost their large base of very low-cost deposits that will help avert rising funding costs.

Financial Stability
CROSS-SECTOR
/
1
November
2018
China’s policy easing will alleviate issuer refinancing pressure but will not eliminate defaults

China recently launched measures to ease liquidity pressure in the onshore credit market, but weak issuers are still vulnerable to default.

SOVEREIGN AND SUPRANATIONAL
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30
October
2018
Moderate economy-wide leverage supports resilience of Latin American countries to shocks, with pockets of vulnerability

Overall leverage is moderate in LatAm compared to other regions, which supports the economies' resilience to shocks. Exceptions include Argentina, Barbados, Belize and Jamaica.

CROSS-SECTOR
/
25
October
2018
US: As the credit cycle advances, mortgage origination quality remains broadly strong, but vulnerabilities are growing

US residential mortgage origination quality remains much stronger than it was in the mid-2000s, but over the past three years origination quality has weakened somewhat.

Political & Geopolitical Risk
CROSS-SECTOR
/
29
October
2018
Brazil: Bolsonaro victory signals continuity, but policies and congress support still unclear

Jair Bolsonaro’s election as Brazil's president will improve investor sentiment, bolstering the real and business confidence, but the exact direction of his economic policy remains unproven

SUB-SOVEREIGN
/
22
October
2018
Outlook on Catalunya’s Ba3 rating stabilised on limited economic impact of independence drive

The intermittent political tensions linked to Catalunya’s unilateral declaration of independence from Spain in October 2017 have had only limited impact on the region’s economic performance. Catalunya remains Spain’s largest regional economy, contributing 19% of national GDP, but has the highest level of debt among the Spanish regions we rate.

CROSS-SECTOR
/
2
October
2018
Trade, healthcare and immigration policy to remain in spotlight after US midterm elections

The November 6 midterm elections will determine control of the US Congress; however, the outcome is unlikely to fundamentally alter the direction of US policy. Instead, President Donald Trump's administration will likely continue to drive the agenda, particularly in the areas of trade, healthcare and immigration.

Technology & Innovation
CORPORATES
/
15
October
2018
Automated vehicle development increasingly dependent on collaboration

The development of autonomous vehicles will increasingly rely on joint ventures and cooperation agreements within the auto industry, such as Honda’s deal with GM, to overcome significant technology integration and capital requirements.

FINANCIAL INSTITUTIONS
/
4
October
2018
Brazilian fintech firms are surging but big banks counter

Brazil’s fintech firms are taking advantage of a large population, low levels of financial inclusion and a smartphone-friendly generation to offer low or even no-cost products and services. The companies still have a tiny market share, however, and many will likely fail or be bought by big banks, which are aggressively rolling out their own digital innovations.

CROSS-SECTOR
/
26
September
2018
China’s focus on new energy vehicles to hurt automakers, have limited effect on others

China's push for new energy vehicles will compress automakers' profitability but have limited effect on other sectors largely because their exposure to the auto sector is low.

Climate Change & Sustainability
FINANCIAL INSTITUTIONS
/
10
October
2018
P&C insurers and reinsurers face losses as Hurricane Michael roils Florida

Property damage from the Category 4 hurricane will impact fourth-quarter earnings for insurers.

SUB-SOVEREIGN
/
8
October
2018
Climate change risks facing Australian states mitigated by diversified economies, strong institutions

Climate challenges facing Australia’s states and territories range from very high and rising temperatures, to droughts and bush fires, and increasingly severe storms and cyclones. The impact on economic growth through lost revenue and greater spending on health and infrastructure is mitigated by the diversity of the states’ economic bases and their robust institutional framework.

SUB-SOVEREIGN
/
4
October
2018
Credit negative typhoon damage to Japan's local economies will be offset by central government's disaster recovery scheme

The typhoon that swept through Japan in early October caused extensive damage to transport networks and power supply within Shizuoka Prefecture and Hamamatsu City. While the adverse impact on economic activity is credit negative, we expect the central government's disaster recovery funding scheme to help alleviate the financial burden facing affected regional and local governments.

Demographics
CROSS-SECTOR
/
7
November
2018
Public budgets will bear the brunt of Spain’s ageing population

The credit effects of Spain's ageing population will be uneven in the period to 2035. Although the overall population is likely to remain steady, its age structure will alter significantly.

CROSS-SECTOR
/
1
November
2018
Changing US demographics present credit risks and opportunities

US demographics are changing rapidly in some parts of the country. Growth, size and makeup of the populations served by public finance sectors will drive revenue and expense trajectories.

CROSS-SECTOR
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31
October
2018
Australian government will fund bulk of increased healthcare spending on ageing population

Rising demand for healthcare will challenge governments' expenditure targets, and spur a focus on value-for-money in spending.

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