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In 2009, the market cap of the US stock market was 30% of the global stock market cap. Today it is almost 50%, see chart below.
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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GDP for the second quarter came in at 3.0% (see chart below), the Atlanta Fed’s GDP estimate for the third quarter currently stands at 3.1%, and jobless claims are at 218,000.
It is difficult to argue that the US economy is slowing down.
Source: BEA, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Forty-two percent of companies in the Russell 2000 have negative earnings. For the mid-cap index, the number is 14%, and for the S&P 500, it is 6%, see chart below.
Sources: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The US has positive net immigration and positive but declining natural population growth.
Germany has negative natural population growth and positive net immigration.
Japan has very negative population growth and modest net immigration.
Source: United States Census Bureau, UN Population Statistics, Germany Federal Statistical Office, Japan Ministry of Internal Affairs and Communications, Haver Analytics, Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The idea that real interest rates become tighter when inflation falls and, therefore, the Fed must follow along with cuts is misguided. No household or firm borrows at the Fed funds rate. It is financial conditions that matter. With record-high stock prices and very tight credit spreads, cutting 50bps makes financial conditions even easier, see charts below.
More broadly, the source of recessions and why the economy suddenly goes from calm to chaos in a nonlinear way is because of a shock. In the 2020 recession, Covid was the shock that triggered a sudden stop in consumer spending and capex spending. In 2008, the shock was Lehman. In the 2001 recession, the shock was a 50% decline in the S&P 500 index.
But there is no exogenous shock today. Households don’t suddenly stop spending unless there is some shock hitting their income or wealth.
The shock during this cycle was interest rates going up since March 2022, and that didn’t generate a recession. Now, interest rates are going down, and financial conditions are easing rapidly. Inflation is currently close to 2%, and growth is strong, and the Atlanta Fed GDP estimate for the third quarter stands at 3.1%.
Summing up, current economic conditions can be best described as “goldilocks.” Not too hot, and not too cold. But the story doesn’t end here. The risk with cutting interest rates too much too quickly is that the economy becomes too hot again.
See our chart book with daily and weekly indicators.
Source: Bloomberg, Apollo Chief Economist 
Note: NBER recession indicators include Real Manufacturing & Trade Sales, Industrial Production Index, Real Personal Income less Transfer Payments, Real Personal Consumption Expenditures, Nonfarm payrolls, and Household survey employment. Source: BEA, FRB, BLS, NBER, Haver Analytics, Apollo Chief Economist 
Source: Federal Reserve Bank of Atlanta, Haver Analytics Apollo Chief Economist 
Note: Filings are for companies with more than $50mn in liabilities. For week ending on September 28, 2024. Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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German exports to Kyrgyzstan have increased significantly since February 2022, see chart below. For a timeline of EU sanctions against Russia, see here.
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The price of car insurance has increased 50% since the pandemic began, see chart below.
Source: BLS, Haver, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The bottom 40% of incomes account for 22% of total consumer spending and 13% of total income, and the top 20% of incomes account for 39% of total consumer spending and 47% of total income, see chart below.
Data for 2022. Source: BLS, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The IMF is forecasting that in a few years GDP per capita in Poland will be higher than in Spain and at the same level as Italy, see chart below.
Source: IMF WEO, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The pharma industry currently accounts for about 70% of GDP growth in Denmark, see chart below.
Source: Statistics Denmark, Apollo Chief Economist See important disclaimers at the bottom of the page.
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