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Modified duration measures the expected change in a bond’s price to a 1% change in interest rates. The charts below show that since the Fed started raising rates, index duration has declined both for high yield and investment grade, with high yield duration currently standing at 3.5% and investment grade duration at close to 7%.
Note: The measure used is modified duration, which measures the expected change in a bond’s price to a 1% change in interest rates. Source: Bloomberg, Apollo Chief Economist 
Note: The measure used is modified duration, which measures the expected change in a bond’s price to a 1% change in interest rates. Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Spreads for public investment grade credit have tightened to just 74 basis points on the index, see the first chart.
But what matters for pension funds, insurance, and households is all-in yields, and all-in yields remain high, in particular for private credit, see the second chart.
For more discussion, see also here.
Source: ICE BofA, Bloomberg, Apollo Chief Economist 
Note: Data from Jan 2014 to Nov 2024. Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The economy is strong, and there are upside risks to inflation. Markets are pricing in too many Fed cuts, see chart below.
Source: Bloomberg, FOMC, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The narrative that the labor market is cooling is inconsistent with the continued strength seen in the incoming data for above-trend GDP growth, strong retail sales, strong durable goods, low jobless claims, and rising average hourly earnings.
In addition, default rates continue to decline, corporate profits are at all-time highs, weekly forward profit margins are at record highs, and US household balance sheets are in excellent shape, see charts below.
In short, the US economy remains incredibly strong.
Combined with tailwinds to growth from record-high stock prices, tight credit spreads, M&A/issuance markets rebounding, the AI/data center boom, the Chips Act, the IRA, the Infrastructure Act, and lower taxes for domestic manufacturers and deregulation likely coming, the bottom line is that we could see a dramatic increase in job growth in November, including a reversal of the weather and strike effects that were pushing down nonfarm payrolls in October.
Our chart book with daily and weekly indicators for the US economy is available here.
Source: PitchBook LCD, Apollo Chief Economist 
Source: BEA, Haver Analytics, Apollo Chief Economist 
Note: The 12-month forward profit margins are calculated by using the weighted average of 1FY (current year estimate) and 2FY (next year estimate) to smooth out fiscal year transitions. Source: Bloomberg, Apollo Chief Economist 
Source: Statistics Canada, Reserve Bank of Australia, Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Our latest credit market chart book is available here, and it is your one-stop guide to the outlook for credit markets after the election.
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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A strong economy usually means higher tax revenues for the government and lower expenditures on unemployment benefits, which in turn means better government finances.
Despite the US being in a solid cyclical position, the US budget deficit is the biggest among OECD countries, see chart below.
If growth slows and the unemployment rate rises, the US fiscal position will deteriorate even further.
Note: Primary budget deficit = budget deficit excluding interest payments. Source: IMF, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Since the Fed began to raise interest rates in March 2022, the FOMC has constantly expected the economy to slow down, see chart below. But it still hasn’t happened. In this Daily Spark, we discuss why.
Source: Federal Reserve Board, Bureau of Economic Analysis, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The average P/E ratio of the top 10 biggest companies in the S&P 500 is almost 50, see chart below. Let’s hope we don’t have a recession anytime soon.
Note: Data as of November 4, 2024. Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The decline in house prices in China continues, with used home prices falling 9% and new home prices falling 6%, see chart below.
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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A new study from S&P shows that roughly 90% of active public equity fund managers underperform their index, and 81% of active public fixed income managers underperform their index on a 10-year horizon, see chart below. For more see here.
Note: Data as of June 30, 2024. Calculated as average of underperformance for each category for regions/countries: US, Europe, Canada, Australia, MENA, Brazil, Chile, South Africa, India, and Japan. Source: SPIVA Global Scorecard, Apollo Chief Economist See important disclaimers at the bottom of the page.
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