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With low immigration and strong tailwinds to growth from AI spending, the industrial renaissance and the One Big Beautifull Bill, it is not a surprise that wage growth is rising for job switchers, see chart below.
Sources: Federal Reserve Bank of Atlanta, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The Strait of Hormuz is a key chokepoint for global oil trade, making any disruption an immediate risk to energy prices and macro outcomes. Our chart book, available here, examines energy demand and supply, as well as the significance of the Strait of Hormuz.
Sources: US Energy Information Administration (EIA) analysis, based on Vortexa tanker tracking and Panama Canal, Apollo Chief Economist 
Sources: Bloomberg, Macrobond, Apollo Chief Economist 
Sources: Bloomberg, Macrobond, Apollo Chief Economist 
Sources: Bloomberg, Macrobond, Apollo Chief Economist 
Note: Assumptions: If oil prices rise by $50/bbl in 1Q26. Sources: Bloomberg SHOK model, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Foreign demand for US assets remains very strong, see chart below.
Note: Data is a 12-month rolling sum. Sources: US Department of Treasury, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The average number of years a company remains in the S&P 500 index keeps declining.
Several factors are driving the faster churn in the index:
1. Creative destruction operates more rapidly, shortening the typical time a company remains large and competitive enough to stay in the S&P 500.
2. Technological innovation (IT, internet, AI, cloud, mobile) creates new business models that scale quickly and displace incumbents before they can adapt.
3. M&A and private equity activity more regularly remove large firms from public markets via buyouts or mergers.
The bottom line is that companies in the S&P 500 stay successful for shorter and shorter periods.
Sources: Creative Destruction Whips Through Corporate America, Corporate Longevity: Turbulence Ahead for Large Organizations – Executive Briefing, 2021 Corporate Longevity Forecast | Innosight, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The dramatic change in recent weeks in the narrative in markets from “the economy is strong” to “we are all becoming unemployed” is truly remarkable.
AI expectations are no longer just disrupting the equity market, with sectors such as software under pressure.
AI expectations have also sparked a macro conversation about a coming rise in the unemployment rate, despite no change in the underlying incoming economic story of a strong US economy driven by AI spending, the industrial renaissance and the One Big Beautiful Bill.
The bottom line is that rates investors are now pricing in rapid AI adoption that will push the unemployment rate higher and warrant many more Fed cuts by December 2026, see chart below.
In other words, markets are starting to believe the techno-optimists’ view of the world, rather than the more measured Fed and economist view.
I think the techno-optimists are wrong about the macro impact, and AI adoption is going to take much longer than the 12-18 months they talk about, and the overall impact on productivity will be much more muted.
Put differently, looking ahead to December 2026, the risk of an overheating economy remains larger than the risk of the unemployment rate going to 10%.
Sources: Bloomberg, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The average daily US equity market turnover now exceeds $1 trillion, driven by higher retail participation, more high-frequency trading and recent tech-sector volatility, see chart below.
Sources: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Economic research institutions have identified sectors and occupations that are likely to be vulnerable to AI, see for example here, here and here.
But employment declines in AI-exposed industries since 2022 are being overattributed to ChatGPT, see the first chart below.
Since late 2022, those same industries have also been hit by three major overlapping shocks: Fed tightening, trade-war uncertainty and a meaningful slowdown in immigration-driven labor supply.
The bottom line is that a large share of the AI-sensitive sectors of the economy is also rate, trade or immigration-sensitive, see the second chart.
Hence, the slowdown in employment in AI-exposed sectors is likely driven by some combination of all these factors rather than only AI.
Note: Includes employment in professional & business services, office & administrative services, accounting & book keeping, legal services, computer systems design, public relations, publishing, broadcasting, data processing & hosting, credit intermediation, insurance, warehousing & storage, couriers & messengers, transportation support services, telecommunications, medical & diagnostic laboratories and motion picture & sound recording industries. Sources: US Bureau of Labor Statistics (BLS), Macrobond, Apollo Chief Economist 
Source: Apollo Chief Economist, Fed: Educational Exposure to Generative Artificial Intelligence, https://www.federalreserve.gov/econres/notes/feds-notes/educational-exposure-to-generative-artificial-intelligence-20250226.html, February 2025 See important disclaimers at the bottom of the page.
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The share of S&P 500 names moving more than 10% in a single day has increased, and high dispersion and low implied correlation suggest stocks are increasingly trading on their own fundamentals, see charts below. At the same time, options activity remains extremely elevated, consistent with heavy retail speculation and leverage-like exposure. Larger idiosyncratic moves and outsized options participation leave the market structure more fragile and more vulnerable to an abrupt, outsized move.
Sources: Bloomberg, Apollo Chief Economist 
Note: It is the option-implied estimate of average pairwise correlation among S&P 500 constituents over one month. Sources: Bloomberg, Macrobond, Apollo Chief Economist 
Sources: Bloomberg, Macrobond, Apollo Chief Economist 
Sources: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The US economy continues to perform well. But the tail risks have increased from 10% to 30%.
What could suddenly change the current situation?
It could be geopolitics, government debt levels or a rapid rise or fall in interest rates.
Predicting the future path of AI adoption and productivity is particularly challenging.
The contribution to GDP growth from AI spending continues to increase, and as a result, if AI fails to meet expectations, the recession probability will rise, see chart below.
Similarly, if AI were to trigger a sharp rise in unemployment, it could also have a disruptive impact on the economy and financial markets.
We remain constructive on the US economic outlook, but investors should pay closer attention to tail risks than usual, because the risk of a sudden shift in investor sentiment is rising.
Note: Assuming upper income constitutes 60% consumption. Sources: US Bureau of Economic Analysis (BEA), Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The appetite for buying gold has increased significantly in recent months in India, see chart below.
Note: Gold prices are INR per troy ounce. Sources: Association of Mutual Funds in India, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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