S&P Retains U.S. Sovereign Ratings

S&P Global has maintained its 'AA+' credit rating for the U.S. with a stable outlook, anticipating that increased revenue from higher tariffs will offset weaker fiscal outcomes, despite no expected significant improvement or persistent deterioration in the deficit. The rating is underpinned by the U.S. economy's wealth, resilience, and reserve currency status, yet constrained by high net general government debt, projected to surpass 100% of GDP by 2028 from 94% in 2024. S&P forecasts U.S. real GDP growth to decelerate to 1.7% this year and 1.6% in 2026, with consumer price inflation moderating from 2.9% in 2025 towards 2% by 2028.

Analysis

S&P Global has affirmed its 'AA+' credit rating for the United States with a stable outlook, signaling that the sovereign's creditworthiness is not expected to deteriorate in the near term. The agency's core rationale is that revenue from higher tariffs will likely offset weaker underlying fiscal outcomes, creating a fragile equilibrium. However, the rating remains constrained by significant fiscal weaknesses, underscored by a projection that net general government debt will rise from 94% of GDP in 2024 to surpass the 100% threshold by 2028. This mounting debt burden is coupled with a forecast for decelerating economic performance, with real GDP growth expected to slow to 1.7% this year and 1.6% in 2026. Supporting the rating are the U.S. economy's inherent strengths, including its wealth, resilience, institutional stability, and the dollar's unique status as the world's primary reserve currency. On the inflation front, S&P projects a moderation from 2.9% in 2025 towards the 2% level by 2028, which could influence future monetary policy.

Key Decisions for Investors

• While the 'AA+' rating affirmation provides a near-term floor for U.S. Treasury valuations, investors should closely monitor the projected rise in the debt-to-GDP ratio above 100% as a key long-term risk factor for sovereign credit.
• The forecast for decelerating real GDP growth to 1.7% suggests potential headwinds for corporate earnings, warranting a selective approach toward sectors highly correlated with domestic economic activity.
• Given that tariff revenues are cited as a key offset to fiscal weakness, investors should remain attentive to shifts in U.S. trade policy, as these could directly impact the fiscal assumptions underpinning the current stable outlook.
• The projection of inflation moderating towards 2% by 2028, combined with slowing growth, could signal a less hawkish monetary policy environment in the medium term, a critical consideration for both fixed-income and equity portfolio positioning.