While markets remain buoyant, they are defying a looming economic slowdown and lurking credit troubles, Fitch Ratings warns.
In a new report, the rating agency said that, despite still-bullish investor sentiment, its view is that the global economy has peaked — and it sees growth dropping in the U.S., China and emerging markets in the year ahead.
And, as global growth slows, the credit picture dims too.
“The global credit risk outlook continues to be framed by deep uncertainties related to a combination of cyclical challenges and secular change,” it said.
For one, the global trade picture remains highly uncertain, despite recent trade deals that pointed to a stabilizing U.S. tariff rate.
Investment booms in certain segments may be carrying hidden risks too, it cautioned.
“Rapid investment growth in such segments as AI-related infrastructure and private credit have also raised the potential for wider vulnerabilities should there be a sudden pull-back or shock in these areas,” it said.
Against that backdrop, “the disparity between buoyant market performance and the shaky economic outlook and risk environment has stretched as valuations continued to rise in [the third quarter],” the report said.
Still, Fitch’s base case is for a global slowdown, but not a recession, in 2026 — and, in that climate, corporate performance, structured finance assets and bank results “are expected to be broadly stable,” it said.