"Default Rates To Rise In U.S. And Europe As Weaker Growth Offsets Rate Cuts" - Fitch Ratings
Portfolio Pulse from Benzinga Newsdesk
Fitch Ratings reports that default rates for high yield bonds and leveraged loans are expected to rise in the U.S. and Europe in 2024 due to weaker economic growth and high interest rates. U.S. leveraged loan defaults increased from 1.6% at the end of 2022 to 3.04% in 2023, and high yield bond defaults rose from 1.35% to 2.99%. European leveraged loan defaults are projected to reach 4% by the end of 2024, with high yield bond defaults also expected to increase. The forecast reflects sector-specific issues in healthcare, pharmaceuticals, telecom, technology, consumer, industrial, and real estate sectors.
December 27, 2023 | 1:43 pm
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NEGATIVE IMPACT
The SPDR S&P 500 ETF Trust (SPY) may face volatility as Fitch Ratings forecasts higher default rates in the U.S., indicating potential economic stress that could affect market sentiment.
As SPY tracks a broad range of U.S. stocks, higher default rates could lead to negative investor sentiment and market volatility, potentially impacting SPY's performance in the short term.
CONFIDENCE 80
IMPORTANCE 60
RELEVANCE 70
NEGATIVE IMPACT
Vanguard FTSE Europe ETF (VGK) may experience downward pressure as Fitch Ratings predicts rising default rates in Europe, suggesting a challenging economic environment that could impact European equities.
VGK, which includes European equities, could be negatively affected by the forecasted increase in default rates, as this may dampen investor confidence and affect the performance of European stocks.
CONFIDENCE 80
IMPORTANCE 60
RELEVANCE 70