For the first time in 20 years, the consensus is now predicting that long rates will go down, see chart below.

For the first time in 20 years, the consensus is now predicting that long rates will go down, see chart below.
Apollo Academy members are split on the outlook for the US economy in the next three quarters regarding the potential for a soft or a hard landing. But a combined majority believes that inflation will remain above the Fed’s 2.0% target through 2024, while a large majority predicts that interest rates—as measured by the 10-year Treasury yield—will be between 3.0% and 4.0% at the end of next year.
The results reflect the answers to three poll questions presented to Apollo Academy members participating in my live class on the mid-year outlook for the economy and capital markets on June 28, 2023. The accompanying charts below provide details.
Watch the full Apollo Academy class on demand here (eligible for one CE credit).
Also, download my white paper.
The US economic outlook has deteriorated compared to six months ago. Most people now believe that we’re in for a period of negative growth over the next three quarters. The question is whether the economy is in for a soft landing or a hard one. Either way, we think high inflation will keep the cost of capital elevated until 2024.
Key Takeaways
The information herein is provided for educational purposes only and should not be construed as financial or investment advice, nor should any information in this document be relied on when making an investment decision. Opinions and views expressed reflect the current opinions and views of the authors and Apollo Analysts as of the date hereof and are subject to change. Please see the end of this document for important disclosure information.
Important Disclosure Information
This presentation is for educational purposes only and should not be treated as research. This presentation may not be distributed, transmitted or otherwise communicated to others, in whole or in part, without the express written consent of Apollo Global Management, Inc. (together with its subsidiaries, “Apollo”).
The views and opinions expressed in this presentation are the views and opinions of the author(s) of the White Paper. They do not necessarily reflect the views and opinions of Apollo and are subject to change at any time without notice. Further, Apollo and its affiliates may have positions (long or short) or engage in securities transactions that are not consistent with the information and views expressed in this presentation. There can be no assurance that an investment strategy will be successful. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially, and should not be relied upon as such. Target allocations contained herein are subject to change. There is no assurance that the target allocations will be achieved, and actual allocations may be significantly different than that shown here. This presentation does not constitute an offer of any service or product of Apollo. It is not an invitation by or on behalf of Apollo to any person to buy or sell any security or to adopt any investment strategy, and shall not form the basis of, nor may it accompany nor form part of, any right or contract to buy or sell any security or to adopt any investment strategy. Nothing herein should be taken as investment advice or a recommendation to enter into any transaction.
Hyperlinks to third-party websites in this presentation are provided for reader convenience only. There can be no assurance that any trends discussed herein will continue. Unless otherwise noted, information included herein is presented as of the dates indicated. This presentation is not complete and the information contained herein may change at any time without notice. Apollo does not have any responsibility to update the presentation to account for such changes. Apollo has not made any representation or warranty, expressed or implied, with respect to fairness, correctness, accuracy, reasonableness, or completeness of any of the information contained herein, and expressly disclaims any responsibility or liability therefore. The information contained herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations. Investors should make an independent investigation of the information contained herein, 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.
Certain information contained herein 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 information. 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.
The Standard & Poor’s 500 (“S&P 500”) Index is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies by market value.
Additional information may be available upon request.
Weekly data for corporate bankruptcy filings has started to meaningfully deteriorate in recent weeks, see chart below. The faster speed of slowing in the weekly data is not consistent with the gradual rise in the monthly default rates seen in HY, IG, and loans.
The quality of auto loans and mortgages originated today is significantly higher than auto loans and mortgages originated before the GFC in 2006, see charts below.
The Fed’s monthly survey of households shows that consumers are not worried about losing their jobs, see chart below.
We’re still in an overheated economy, but we’re less overheated than we were a few months ago with slowdowns happening in the labor market and in manufacturing. In the week ahead, we’ll be tracking the release of PCE inflation data for May. The consensus is expecting core inflation to come in at 4.7%—the same level as the month prior. In broad terms, housing makes up over 40% of consumer spending, so it’s important when tracking inflation to monitor whether home prices are going up or down. If home prices rise, and the housing market continues to rebound, that could put upward pressure on inflation—potentially putting the Federal Reserve in a position to raise interest rates for longer to get inflation under control.
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.
Manhattan rents just reached a new record high at $4,360, and accelerating rent inflation is a problem for the Fed because housing has a weight of 40% in the CPI basket, see chart below.
Twenty-five percent of all US government debt outstanding has been added since the beginning of 2020. And with higher debt levels and higher interest rates, debt servicing costs have increased from $1 billion per day in 2020 to almost $2 billion per day in 2023, see charts below.