Fitch Ratings has adjusted a quarter of its US sector outlooks for 2025 to ‘deteriorating’.
The agency cited slowing growth, increasing uncertainty and the expectation of higher-for-longer interest rates for the remainder of the year.
Trump’s ‘Big Beautiful’ tax and spending bill, passed into law on 4 July, has highlighted significant long-term challenges for the US fiscal outlook, Fitch said. It anticipates that the bill and extended tax cuts will keep general government deficits above 7% of GDP and raise the debt-to-GDP ratio to 135% by 2029.
Healthcare and related sectors are expected to be hit hard, with federal health spending set to be cut by US$1 trillion over the next decade and access limited to the Affordable Care Act marketplace.
Tariff activity in April put strain on funding and liquidity conditions, but these have stabilised as implementation was postponed to August, Fitch noted. However, depreciation of the US dollar and elevated long-term sovereign bond yields signify market concerns about tariff outlooks and overall fiscal trends, it added.
Despite these factors, Fitch has amended the US GDP growth forecast to 1.5%, up from the 1.2% predicted in April – albeit with the expectation for momentum to slow down over the course of H2. The risk of recession has also fallen, following reduced China-US trade conflicts.
In Q2 2025, investment-grade momentum has weakened and the agency has seen more sub-investment-grade downgrades than upgrades. Fitch expects the default rate for high-yield bonds to rise to 4-4.5% in H2, and to 5.5-6% for leveraged loans.
©Markets Media Europe 2025
