UKRAINE
Ukrainian armed forces hit targets inside Russia using U.S. and U.K.-supplied missiles, something that Western allies had previously prohibited Ukraine from doing. The Western allies said that this change was an escalation in response to North Korean troops fighting for Russia in the conflict. In response, Russia made changes to its nuclear doctrine to allow the use of nuclear weapons in response to conventional attacks inside Russia using munitions provided by nuclear states. The Russian military also used a much longer-range ballistic missile in an attack on Ukraine as a demonstration that Russia has the ability to hit Western Europe with such missiles.
Our Take: Both sides of this conflict are lending a lot of credibility to the idea that the incoming Trump administration will force a resolution in 2025. Both sides are escalating the conflict in order to try to strengthen their position in any negotiations. This increases the risk of such escalation spiraling out of control, and it increases uncertainty around global food and oil supplies and prices.
MUNICIPALS
S&P Global Ratings upgraded the City of Philadelphia general obligation debt rating from A to A+. S&P cited “Philadelphia's demonstrated long-term commitment to maintaining a credit-supportive financial profile.” S&P also indicated that the city has been making additional pension payments and rebuilding its reserves.
Our Take: Even with the upgrade this week, certain financial pressures remain. Philadelphia has been receiving federal stimulus funds, which are due to expire. In addition, the city has projected operating deficits for 2026 and 2027. Nevertheless, the S&P upgrade reflects a city moving in the right direction, albeit one with challenges still to overcome.