Want it delivered daily to your inbox?
-
The incoming data continues to remain robust. The US economy added 254,000 jobs in September versus a consensus expectation of 150,000 jobs, the unemployment rate fell from 4.2% to 4.1%, wage growth is solid and remains sticky, job openings are going up, and the ISM services reading is also strong.
Why is the economy still strong? Because of lower sensitivity to Fed hikes for consumers and firms with locked-in low interest rates. Because of strong AI spending. Because of strong fiscal and defense spending. These tailwinds are countering the long and variable lags of monetary policy. And now the Fed is cutting rates, which is boosting growth and inflation further. Combined with very easy financial conditions, the bottom line remains that rates will stay higher for longer.
Our chart book with daily and weekly data is available here.
Source: BLS, Haver Analytics, Apollo Chief Economist 
Note: The Worker Adjustment and Retraining Notification (WARN) Act helps ensure 60 to 90 days advance notice in cases of qualified plant closings and mass layoffs. WARN factor is the Cleveland Fed estimate for WARN notices (https://www.clevelandfed.org/publications/working-paper/wp-2003r-advance-layoff-notices-and-aggregate-job-loss). Source: Department of Labor, Haver Analytics, Federal Reserve Bank of Cleveland, Apollo Chief Economist 
Source: PitchBook LCD, Apollo Chief Economist See important disclaimers at the bottom of the page.
-
When FOMC members put together their forecasts, they are asked about the risks to their projections.
You would think that the risks to your forecast were symmetric over time. But, as the chart below shows, FOMC members are always much more worried about the risk that the unemployment rate is rising than the risk that the unemployment rate is falling.
This preference for unemployment staying low suggests that policymakers would prefer to cut interest rates too much too quickly to minimize the risk that the unemployment rate will move higher. Which of course increases the risk that inflation starts to move up again.
Note: No survey was conducted in March 2020. Source: Federal Reserve, Apollo Chief Economist See important disclaimers at the bottom of the page.
-
The share of the population using the internet in India has increased over the past decade from 14% to 52%, see chart below.
Note: Internet adoption rate is defined as number of individuals using the internet as a % of total population. Source: Kepois Analysis via datareportal.com See important disclaimers at the bottom of the page.
-
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.
-
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.
-
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.
-
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.
-
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.
-
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.
-
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.
This presentation may not be distributed, transmitted or otherwise communicated to others in whole or in part without the express consent of Apollo Global Management, Inc. (together with its subsidiaries, “Apollo”).
Apollo makes no representation or warranty, expressed or implied, with respect to the accuracy, reasonableness, or completeness of any of the statements made during this presentation, including, but not limited to, statements obtained from third parties. Opinions, estimates and projections constitute the current judgment of the speaker as of the date indicated. They do not necessarily reflect the views and opinions of Apollo and are subject to change at any time without notice. Apollo does not have any responsibility to update this presentation to account for such changes. There can be no assurance that any trends discussed during this presentation will continue.
Statements made throughout this presentation are not intended to provide, and should not be relied upon for, accounting, legal or tax advice and do not constitute an investment recommendation or investment advice. Investors should make an independent investigation of the information discussed during this presentation, including consulting their tax, legal, accounting or other advisors about such information. Apollo does not act for you and is not responsible for providing you with the protections afforded to its clients. This presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any security, product or service, including interest in any investment product or fund or account managed or advised by Apollo.
Certain statements made throughout this presentation may be “forward-looking” in nature. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking information. As such, undue reliance should not be placed on such statements. Forward-looking statements may be identified by the use of terminology including, but not limited to, “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology.