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
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.
Highlights
Cross-sector
/
25
September
2018
Eleven sectors with $2.2 trillion of debt have elevated exposure to environmental risk
Our heat map assesses the environmental risk exposure of 84 sectors globally, with $74.6 trillion in rated debt. We find that 11 sectors with $2.2 trillion in rated debt have elevated credit exposure. For these sectors, environmental risks are either already material to credit quality or could be over the next three to five years.
Growth
SOVEREIGN AND SUPRANATIONAL
/
12
October
2018
Portugal’s rating upgraded to Baa3 stable on declining debt, improving growth

Portugal’s credit profile has returned to investment grade on account of a gradual but sustained decrease in its debt levels to a still-high 124.8% of GDP in 2017. Moreover, Portugal’s real GDP growth rose to 2.8% in 2017, the highest level in 17 years and close to pre-crisis levels in real terms.

CORPORATES
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11
October
2018
Trade tensions will modestly disrupt Europe's trade flow with the US and China

Three main factors lessen the negative effect on European companies: their small direct trade exposures with the US and China, the global footprint of many large European companies, and lower than expected Chinese tariffs on some European products.

SOVEREIGN AND SUPRANATIONAL
/
10
October
2018
Japan: Abenomics targets still far from reach, but fiscal, economic performance have strengthened

Shinzo Abe's continued leadership of the ruling party points to continuity in the implementation of accommodative monetary policy, flexible fiscal policy and structural reform.

Financial Stability
FINANCIAL INSTITUTIONS
/
4
October
2018
The impact of ongoing financial turmoil on Argentine banks

Rising government securities income will help offset slower loan growth and higher credit costs as asset risks increase; funding remains stable.

SOVEREIGN & SUPRANATIONAL
/
3
October
2018
Revised NAFTA deal reduces trade-related uncertainty, a credit positive for Mexico and Canada

The revamped trade deal reduces trade-related uncertainty for Mexico and Canada and supports their prospects for near-term growth and investment. The new agreement's main changes, including to North America's auto sector and Canada's dairy industry, will have a minimal effect on Canada’s sovereign credit profile.

CROSS-SECTOR
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1
October
2018
Vulnerabilities in Europe’s financial system heighten the exposure of many issuers

With debt loads increasing, fewer tools to aid recovery, and political and regulatory risks rising, European issuers across multiple sectors could be adversely affected to a greater degree in the event of another downtown.

Political & Geopolitical Risk
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.

CORPORATES
/
27
September
2018
European airlines could face severe credit impact from 'no-deal' Brexit scenario

If the UK were to exit the European Union without a deal to substantially replicate existing aviation agreements, European airlines could face significant cash flow and liquidity challenges. Our new report identifies five main risks that a no-deal Brexit would pose to EU airlines.

CROSS-SECTOR
/
20
September
2018
Post-election credit quality in Brazil will take cues from policy continuity or disruption

Brazil’s credit quality after October’s presidential election, and the credit quality of its banking, infrastructure and corporate sectors, will depend on the new administration working with congress to achieve much-needed fiscal reforms. Policy continuity would sustain the country’s economic growth and help stabilize government debt levels, while policy disruption would risk triggering a negative feedback loop that undermines investor confidence and the recovery itself.

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
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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
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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
SOVEREIGN AND SUPRANATIONAL
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8
October
2018
Rising income inequality will likely weigh on US credit profile

High and rising wealth and income inequality have been exacerbated by the global financial crisis and make it politically more difficult to for the US to mitigate material fiscal challenges.

CROSS-SECTOR
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27
September
2018
Longevity and rising number of households will support housing demand in Europe over the next decade

The number of households will continue to rise over the next decade across Europe as a result of rising home demand from an ageing population and population growth. These trends will support house prices and demand for rented accommodation.

Financial Institutions
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18
September
2018
Demographic changes will bring new challenges and opportunities to Asia Pacific banks in the next decade

Demographic changes will pose new challenges for banks in Hong Kong, Japan, Korea and Taiwan, while bringing opportunities for those in India, Indonesia and the Philippines.

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