The annual default rate for speculative-grade companies will edge up to an estimated 3.3% in 2020 from 3.0% in 2019 under Moody's baseline forecast. These forecasts take into account the increased share of lower rated issuers. And while in the baseline it is not assumed a recession will occur in 2020, expect growth to slow compared to 2019. Also offered is a default forecast for an alternative pessimistic scenario in which economic and geopolitical shocks cause severe financial market disruptions and a turn in the credit cycle. Under this severe scenario, the default rate could jump to 15.1%, but based on current trends you could see a low 4% probability of such a scenario crystallizing.