Global Credit Outlook 2025

20 January 2025

Interest rates are on a downward trajectory heading into 2025, but will this translate to a rebound in global credit markets? In light of the uncertain economic environment and banks’ ongoing imposition of tight lending standards,^[1] it’s hard to say when lower rates might translate to a meaningful improvement in credit conditions.

Moreover, Federal Reserve Chair Jerome Powell stressed after lowering rates on December 18 that further cuts could be constrained by stubbornly high inflation.^[2] Against this backdrop, private credit will continue to grow and fill gaps left by the retreat of traditional lenders, sustaining business expansion and funding investments at a critical juncture in many economies’ recovery.

Current credit market conditions are described as “broadly neutral” by Fitch Ratings^[3] and “supportive” by S&P Global.^[4] But both warn that slowing economies in China and the US, the fragile recovery in Europe, deepening geopolitical rifts, and uncertainty around the trade and economic policies of US president-elect Donald Trump could reignite risk-aversion among lenders and affect capital flows.

Since 2022, markets have anticipated more aggressive rate cuts than central banks eventually provided.^[5] Furthermore, the ‘neutral’ level at which interest rates neither stimulate nor constrict the economy may have risen in the post-pandemic era, suggesting less room for cuts than many are hoping for. This is because interest rates determine the balance between savings and investment, and the latter has risen considerably because of the artificial intelligence boom and commitments to the energy transition.

It’s also worth noting that the decline in US interest rates will likely be much more gradual than the increase, and rates are not expected to fall to the levels reached during the unprecedented stretch of easy money in the aftermath of the global financial crisis.^[6]

Elsewhere, monetary policy easing is likely to occur at varying speeds, especially if the US follows through with Trump’s promise to introduce a universal tariff and ratchet up other tariffs on China in particular. If that happens, several central banks, including those in Europe and China, may decide to lower rates faster than they otherwise would to offset the impact.

Crucially, higher tariffs would also feed inflation in the US, which would be likely to slow the Fed’s efforts to ease interest rates. That, in turn, could delay cuts by other central banks around the world. A stronger US dollar could also narrow the options of overseas borrowers who seek USD financing, particularly those in emerging markets. This could lead to greater onshore financing activities.

Another factor weighing on the overall credit market is deadlines in 2025 for banks to implement the so-called ‘Basel III Endgame’, the final implementation in the US of rules drawn up by the Basel Committee on Banking Supervision, which seeks to strengthen risk management within the banking sector in response to the 2008 global financial crisis.^[7]

This could pressure banks to further curtail lending, although it also remains to be seen how the rules will be implemented by an incoming Trump administration that is seen as more supportive of deregulation.

Specialty finance in the spotlight

The confluence of tighter bank regulation, stricter capital requirements, and ongoing regulatory and accounting changes in the wake of the financial crisis has spurred dramatic growth of private credit markets.

Many observers, including investment management giant PIMCO, expect the next phase of private credit’s growth to be led by specialty finance, a segment encompassing lending secured by financial or hard assets,^[8] which is currently valued at an estimated $20 trillion globally.

Specialty finance now provides critical funding around the world for a wide range of business, consumer and investment purposes. As with the wider private credit market, borrowers are drawn to specialty finance by its ability to provide execution speed, certainty and flexible terms.^[9]

According to BlackRock, the multi-faceted growth trends underpinning the expansion of the private credit market should gain further momentum in 2025.^[10] BlackRock analysts predict that “private markets will play a role in financing some long-term structural shifts in the global economy.”

Private credit and specialty finance could also play a vital role in helping to shore up economic activity in the face of stringent credit conditions among traditional lenders, which make it more difficult for businesses to borrow to finance growth or ongoing operations. Although most analysts predict the world will avoid recession in 2025,^[11] a further deterioration in mainstream credit conditions could muddy the outlook. But as private credit continues to increase in size and sophistication, it could increasingly function as a dampener of these trends, dynamically responding to retrenchment of bank lending.

Among the various forms of private credit, securities-backed financing has proven to be a flexible, cost-effective and stable source of liquidity for corporate and personal needs.

Regardless of wider credit conditions, long-term shareholders can retain the upside in their underlying holdings and access securities-backed financing from EquitiesFirst to raise capital for any purpose at competitive pricing.

[1] https://www.reuters.com/markets/us/tight-credit-conditions-add-case-fed-interest-rate-cut-2024-11-06/

[2] https://www.reuters.com/markets/us/fed-expected-combine-interest-rate-cut-with-hawkish-2025-outlook-2024-12-18/

[3] https://www.fitchratings.com/research/insurance/global-risks-raise-significant-uncertainties-for-2025-credit-outlook-20-12-2024

[4] https://www.spglobal.com/_assets/documents/ratings/research/101609737.pdf

[5] https://www.spglobal.com/_assets/documents/ratings/research/101609737.pdf

[6] https://www.spglobal.com/_assets/documents/ratings/research/101609737.pdf

[7] https://www.cambridgeassociates.com/en-as/insight/2025-outlook-credit-markets/

[8] https://www.pimco.com/us/en/insights/private-credit-asset-based-finance-shines-as-lending-landscape-evolves

[9] https://www.spglobal.com/_assets/documents/ratings/research/101609737.pdf

[10] https://www.blackrock.com/institutions/en-au/insights/credit-outlook

[11] https://money.com/recession-predictions-2025-economists/

Disclaimer

Past performance does not guarantee future returns, and individual returns are not guaranteed or warranted.

This Document is intended solely for accredited investors, sophisticated investors, professional investors, or otherwise qualified investors, as may be required by law or otherwise, and it is not intended for, and should not be used by, persons who do not meet the relevant requirements. The content provided herein is for informational purposes only and is general in nature and not targeted to any specific objective or financial need. The views and opinions expressed in this Document have been prepared by third parties and do not necessarily reflect the views and opinions of EquitiesFirst. EquitiesFirst has not independently examined or verified the information provided herein, and no representation is made that it is accurate or complete. Opinions and information herein are subject to change without notice. The content provided does not constitute an offer to sell (or solicitation of an offer to purchase) any securities, investments, or any financial products (“Offer”). Any such Offer shall only be made through a relevant offering or other documentation which sets forth its material terms and conditions. Nothing contained in this Document shall constitute a recommendation, solicitation, invitation, inducement, promotion, or offer for the purchase or sale of any investment product by Equities First Holdings, LLC or its subsidiaries (collectively, “EquitiesFirst”), nor shall this Document be construed in any way as investment, legal, or tax advice, or as a recommendation, reference, or endorsement by EquitiesFirst. You should seek independent financial advice prior to making an investment decision about a financial product.

This Document contains the intellectual property of EquitiesFirst in the United States and other countries, including, without limitation, their respective logos and other registered and unregistered trademarks and service marks. EquitiesFirst reserves all rights in and to their intellectual property contained in this Document. The Document should not be distributed, published, reproduced or otherwise made available in whole or in part by recipients to any other person and, in particular, should not be distributed to persons in any country where such distribution may lead to a breach of any legal or regulatory requirement.

EquitiesFirst make no representation or warranty with respect to this Document and expressly disclaim any implied warranty under law. You acknowledge that EquitiesFirst is not liable under any circumstances for any direct, indirect, special, consequential, incidental, or punitive damages whatsoever, including, without limitation, any lost profits or lost opportunity, even if EquitiesFirst has been advised of the possibility of such damages.

EquitiesFirst makes the following further statements that may be applicable in the stated jurisdiction:

The information contained on this Document is intended for persons located in Australia only and classified as a Wholesale Client only as defined in Section 761G of the Corporations Act 2001. The distribution of information to persons outside this criteria may be restricted by law and persons who come into possession of it should seek advice and observe any such restriction.

The material contained in this Document is for information purposes only and should not be construed as an offer or solicitation or recommendation to buy or sell financial products.

The information contained in this Document is intended to be general in nature and is not personal financial product advice. Any advice contained in the Document is general advice only and has been prepared without considering your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. You should seek independent financial advice and read the relevant disclosure statements or other offer documents prior to making an investment decision about a financial product.

Dubai: Equities First Holdings Hong Kong Ltd (DIFC Representative Office) at Gate Precinct Building 4, 6th Floor, Office 7, Dubai International Financial Centre (commercial license number CL7354) is regulated by the Dubai Financial Services Authority (“DFSA”) as a Representative Office (DFSA Firm Reference No.: F008752). All rights reserved.

The information contained in this document is intended to be general in nature, and, to the extent that it is perceived as advice, any advice contained in this document is general advice only and has been prepared without considering your objectives, financial situation, suitability of the financial products or your needs.

The material contained in this document is for information purposes only and should not be construed as financial advice, including an offer or solicitation or recommendation to buy or sell financial products. The information contained in this document is intended to be general in nature and any advice contained in this document is general advice only and has been prepared without considering your objectives, financial situation, suitability of the financial products or your needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. If you do not understand the contents of this document, you should consult an authorised financial adviser.

This document relates to a financial product which is not subject to any form of regulation or approval by the DFSA. The DFSA has no responsibility for reviewing or verifying any documents in connection with this financial product. Accordingly, the DFSA has not approved this document or any other associated documents nor taken any steps to verify the information set out in this document, and has no responsibility for it.

Hong Kong: Equities First Holdings Hong Kong Limited is licensed under the Money Lenders Ordinance (Money Lender’s Licence No. 1659/2024) and to carry on the business of dealing in securities (Type 1 licence) under the Securities and Futures Ordinance (“SFO”) (CE No. BFJ407). This Document has not been reviewed by the Hong Kong Securities and Futures Commission. It is not intended as an offer to sell securities or a solicitation to buy any product managed or provided by Equities First Holdings Hong Kong Limited and is only intended for persons who qualify as Professional Investors under the SFO. This document is not directed to individuals or organizations for whom such offers or invitations would be unlawful or prohibited.

Korea: The foregoing is intended solely for sophisticated investors, professional investors or otherwise qualified investors who have sufficient knowledge and experience in entering into securities financing transactions. It is not intended for, and should not be used by, persons who do not meet those criteria.

United Kingdom: Equities First (London) Limited is authorised and regulated in the UK by the Financial Conduct Authority (“FCA”). In the UK, this Document is only being distributed and made available to persons of the kind described in Article 19(5) (investment professionals) and Article 49(2) (high net worth companies, unincorporated associations etc.) of Part IV of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (‘’FPO’’) and any investment activity to which this presentation relates is only available to, and will only be engaged in with, such persons. Persons who do not have professional experience in matters relating to investment or who are not persons to whom Article 49 of the FPO applies should not rely on this document. This Document is only prepared for and available to persons who qualify as Professional Investors under the Markets in Financial Instruments Directive.