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When policy uncertainty went up, capital markets activity started slowing down, with a decline in loan issuance, IPO activity, and M&A activity, see charts below.
Note: Reflects repricings and extensions done via an amendment process only. Sources: PitchBook LCD, Apollo Chief Economist 
Note: Data shows completed IPO transactions. Sources: S&P Capital IQ, Apollo Chief Economist 
Note: Data shows completed M&A transactions. Sources: S&P Capital IQ, Apollo Chief Economist 
Sources: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Surveys of CEOs and CFOs show that corporate confidence has declined in recent months, see charts below.
Sources: Chief Executive Magazine, Bloomberg, Macrobond, Apollo Chief Economist 
Sources: Duke University & FRB Richmond & FRB Atlanta, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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If uncertainty stays elevated for an extended period, it will have a more negative impact on the economy, see chart below, which shows the impulse responses of a temporary and a permanent shock to economic policy uncertainty in a vector autoregression model with GDP and economic policy uncertainty.
Note: Impulse response from the VAR model with variables log (Real GDP) and log (Economic Policy uncertainty index). A one standard deviation shock to economic policy uncertainty leads to a -0.2% point decline in Real GDP. Temporary shock is defined as a four standard deviation shock in Q1, and permanent shock is defined as a four standard deviation shock in Q1, three standard deviation shock in Q2, two standard deviation shock in Q3, and one standard deviation shock in Q4. Sources: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Household sector leverage and banking sector leverage have declined significantly since 2008, see chart below. Over the same period, federal government leverage has increased significantly, and corporate leverage has moved sideways.
The bottom line is that the private sector in the US is in incredibly good shape.
Sources: Federal Reserve Board, NBER, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The IMF is forecasting that next year, income per capita will be higher in Poland than in Japan, see chart below.
Note: PPP = Purchasing Power Parity. Sources: IMF, Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Twenty percent of households in their 40s and 50s have borrowed money from their 401(k) retirement account, see chart below.
Note: Data as of 2022. Sources: EBRI/CI Participant-Directed Retirement Plan Data Collection Project, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Tariffs can be used to boost the size of the US manufacturing sector.
But tariffs, unfortunately, have two short-term negative effects on the economy:
- Elevated uncertainty has a negative impact on household and corporate spending decisions.
- Tariffs have a negative impact on corporate earnings as companies experience higher production costs.
Uncertainty may have declined modestly in recent weeks, but the next step is for tariffs to begin to have a negative impact on corporate earnings over the coming quarters. Combined with the risk of retaliation, this is negative for the S&P 500.
The bottom line is that the incoming data remains solid, but the soft data is deteriorating. With tariffs not going away, the observed weakness in the soft data should be expected to spill over to weakness in the hard data over the coming months. The next important data point is the March employment report, which will be released on Friday, April 4. The survey week for the employment report was the week of March 12, when tariff uncertainty was very elevated.
The performance of the S&P 500 will depend on the size of the adjustment costs as companies adjust to a new situation with permanently higher tariffs, see chart below.
Note: Using periods with 10% correction and categorizing them if they were followed by a recession. Sources: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The recent decline in semiconductor stocks points to a coming slowdown in semiconductor sales, see chart below.
Sources: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The chart below shows individual FOMC members’ forecast of where they think interest rates will be over the coming years. The degree of disagreement on the committee is remarkable, with one FOMC member saying that in 2026, the Fed funds rate will be almost 4%, and other FOMC members saying that they think interest rates in 2026 will be just above 2.5%.
The dot plot also shows that there is debate about where the Fed funds rate will be in the long run, also with a range between 2.5% and 4%. Perhaps most importantly, none of the FOMC members are predicting a sharp decline in the Fed funds rate to zero, telling the market that nobody on the FOMC is expecting a recession.
Sources: FOMC, Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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When FOMC members are asked about the risks to their outlooks, they respond that they are worried about upside risks to unemployment and inflation, see charts below.
In other words, the Fed is worried that the ongoing stagflation shock is going to intensify further.
Sources: Federal Reserve Board, Bloomberg, Apollo Chief Economist 
Sources: Federal Reserve Board, Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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