Will we see a repeat of the 1970s with the Fed easing policy too quickly, triggering a rise in inflation in 2025?
Recent inflation readings show signs that the decline in inflation has stalled, and there is a risk of reacceleration, see charts below. Fed and market-implied measures of inflation are all above the Fed’s 2% target and not showing signs of moving down toward the Fed’s 2% inflation target. Short-run and long-run inflation expectations are also moving higher.
The recent uptrend, combined with strong economic momentum, is pointing towards a rebound in inflation in 2025 and not a softening to justify Fed cuts. The probability is rising that the Fed may have to raise interest rates in 2025.
For investors, the risk is a repeat of 2022, where the 60/40 portfolio underperformed significantly.
Our chartbook with recent measures of inflation is available here.
Source: BLS, Bloomberg, Apollo Chief EconomistSource: Federal Reserve Bank of Atlanta, Federal Reserve Bank of New York, Haver Analytics, Apollo Chief EconomistSource: BLS, Haver Analytics, Apollo Chief EconomistSource: BLS, Haver Analytics, Apollo Chief EconomistSource: BEA, Haver Analytics, Apollo Chief EconomistSource: BLS, Haver Analytics, Apollo Chief EconomistSource: BEA, Haver Analytics, Apollo Chief EconomistSource: Federal Reserve Bank of San Francisco, Haver Analytics, Apollo Chief EconomistSource: Federal Reserve Bank of Cleveland, Haver Analytics, Apollo Chief EconomistSource: University of Michigan, Haver Analytics, Apollo Chief EconomistSource: University of Michigan, Haver Analytics, Apollo Chief Economist
This presentation may not be distributed, transmitted or otherwise communicated to others in whole or in part without the express consent of Apollo Global Management, Inc. (together with its subsidiaries, “Apollo”).
Apollo makes no representation or warranty, expressed or implied, with respect to the accuracy, reasonableness, or completeness of any of the statements made during this presentation, including, but not limited to, statements obtained from third parties. Opinions, estimates and projections constitute the current judgment of the speaker as of the date indicated. They do not necessarily reflect the views and opinions of Apollo and are subject to change at any time without notice. Apollo does not have any responsibility to update this presentation to account for such changes. There can be no assurance that any trends discussed during this presentation will continue.
Statements made throughout this presentation are not intended to provide, and should not be relied upon for, accounting, legal or tax advice and do not constitute an investment recommendation or investment advice. Investors should make an independent investigation of the information discussed during this presentation, including consulting their tax, legal, accounting or other advisors about such information. Apollo does not act for you and is not responsible for providing you with the protections afforded to its clients. This presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any security, product or service, including interest in any investment product or fund or account managed or advised by Apollo.
Certain statements made throughout this presentation may be “forward-looking” in nature. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking information. As such, undue reliance should not be placed on such statements. Forward-looking statements may be identified by the use of terminology including, but not limited to, “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology.
