KUALA LUMPUR (Dec 8): Several unexpected events this year have set the stage for increased global credit market volatility and uncertaintities in 2017, according to a new report released by Standard & Poor’s (S&P).

In an article titled “Global Credit Market  Outlook: The Conditions Are Set For Heightened Volatility In 2017” published by S&P Global Fixed Income Research, it said geopolitical factors will have the greatest impact on global credit markets in 2017, as the Trump Administration's currently unclear economic and trade policies, as well as the eventual implementation of Brexit, create uncertainties.

It said defying  what most polls were showing in the lead-up to the elections, the U.K. voted to leave the EU in June, and Donald Trump defeated Hillary Clinton for the  U.S. presidency.

The article said these unexpected outcomes produced increased volatility in  the financial markets immediately afterwards. In the case of Brexit, the  effect has thus far mostly been short-lived outside of currency markets.

S&P said regarding U.S. monetary policy, its economists expected the Federal Reserve to raise interest rates three to four times in 2016, but the year is nearly over, and have yet to see a single increase.

It said one thing that it mostly expected  was the increase in corporate defaults in the U.S. oil and gas sector, though  the full extent of the increase was underestimated.

S&P Global Fixed Income Research head Diane Vazza said S&P expects market volatility across most asset classes to continue into next  year.

“Most of this will likely be a continuation of the increased uncertainty  from this year, rather than any certain downturn.

"The potential for financial disruptions is higher than we previously expected, especially in light of the multiple,

unexpected outcomes in 2016.

“Still, we believe these factors are unlikely to have any major, negative impact on most of our core measures of credit markets--issuance trends, default rates, rating actions, and borrowing  costs--for the coming year,” said Vazza.

She said geopolitical factors will have the greatest impact on global credit markets in 2017, as the Trump Administration's currently unclear economic and trade policies, as well as the eventual implementation of Brexit, create uncertainties.

Vazza said these issues have a direct effect on the two largest  economies (the U.S. and the EU), with ripple effects expected to be felt globally.

“Because of the relatively unexpected results of Brexit and the Trump  victory, the future courses of these events could present a wider range of  both upside and downside risks to our credit market measures,” said Vazza.