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Financial fundamentals remain the primary drivers of credit risk. Across more than 7,400 companies and 280,000 firm-year observations, profitability (ROA), leverage and size collectively explain the vast majority of variation in credit risk.
Geopolitical resolution is the master assumption. Equity markets are pricing a framework agreement by September, consistent with the prediction market consensus and the pronounced kink in VIX term structure at Q3.
Extreme heat is emerging as a structural economic risk, with Europe highly exposed.Heat stress events have multiplied sevenfold since the 1980s while the average death toll per event has risen fivefold.