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Interest coverage ratios have rebounded for both investment grade credit and high yield credit. This was driven by continued strong earnings and also the Fed pivot last year, which triggered not only expectations of lower rates but also a strong rally in IG and HY spreads, see charts below.
Source: Bloomberg, Apollo Chief Economist 
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Commodity prices are moving higher driven by the following:
1) Reaccelerating US growth
2) Geopolitical uncertainty
3) Segmentation of global trade, and
4) Strong AI demand for energy
Our latest outlook for energy prices, agriculture prices, and metals prices is available here.
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The housing slowdown in China continues, see chart below.
Source: NBS China, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The Marshall Plan was 5% of US GDP, and the US fiscal response to Covid was 20% of US GDP, see chart below.
Source: BEA, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Equity analysts continue to increase their earnings expectations for the S&P 500, see chart below.
There are simply no signs of a slowdown in corporate earnings. The economy continues to power ahead fueled by easy financial conditions, and this is an upside risk to inflation over the coming months.
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Month-over-month inflation has been rising on average 0.4% for the past three months and 0.3% for the past six months.
If inflation continues to rise at this pace for the rest of the year, then year-over-year core CPI inflation will increase from currently 3.8% to 4% to 4.5%, see chart below.
Even if month-over-month increases in core CPI comes in at the historical average of 0.2% for the rest of the year, then year-over-year inflation will still end the year at 3%.
To get inflation back to the Fed’s 2% inflation target, core CPI for the rest of the year will have to come in at an unprecedented 0.1% month over month.
The bottom line is that base effects and strong recent readings complicate the Fed’s efforts to get inflation back to its 2% inflation target. Put differently, it will require a sharp, immediate slowdown in consumer spending and capex spending for the Fed to be able to cut rates by the end of this year.
Source: BLS, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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In financial markets, a lot of conversations are about public companies, but the reality is that in the US, 87% of firms with revenue greater than $100 million are private, see chart below.
Source: S&P Capital IQ, Apollo Chief Economist. Note: For companies with last 12-month revenue greater then $100 million by count. See important disclaimers at the bottom of the page.
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It normally takes eight months from the last Fed hike until the central bank starts cutting. But during this cycle, the Fed has kept interest rates constant for ten months since the last hike in July 2023, see chart below. With easy financial conditions still giving a significant boost to inflation and growth over the coming quarters, the risks are rising that we could see a Fed cycle that is very different, with the Fed keeping rates higher for much longer than we usually see.
Source: FRB, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Younger households tend to have lower credit scores, and the consequence is that Fed hikes and associated tighter credit conditions tend to have a more negative impact on younger generations, see chart below.
Source: Experian, Apollo Chief Economist. Note: Data for 2023. See important disclaimers at the bottom of the page.
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The price of gold has been rising in recent months on the back of geopolitical tensions, central banks including China stepping up purchases of gold, and expectations of lower rates triggering a rise in inflation after the December Fed pivot.
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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