S&P500 Bifurcation

From last week’s employment report, we learned that the US economy created 336,000 jobs in September—which was better than expected. In the week ahead, we will get CPI inflation data. The consensus expects headline inflation to come in at 3.6% and core inflation to come in around 4.1%—still above the Federal Reserve’s 2% inflation target. Taken together, we can assume that the Fed is not done with raising rates. This “higher for longer” scenario is biting harder and harder on consumers and corporates. In looking at how markets are trading against this backdrop, we’ve been tracking the sizable divergence happening in the S&P500. The S&P7, the seven biggest stocks in the index, are up 50% so far this year. Meanwhile the S&P493, the vast majority of stocks in the index, are essentially flat. The bottom line is that if you buy the S&P500 today, you are basically buying a handful of companies that have an average P/E ratio of around 50.

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.

S&P500 Bifurcation

From last week’s employment report, we learned that the US economy created 336,000 jobs in September—which was better than expected. In the week ahead, we will get CPI inflation data. The consensus expects headline inflation to come in at 3.6% and core inflation to come in around 4.1%—still above the Federal Reserve’s 2% inflation target. Taken together, we can assume that the Fed is not done with raising rates. This “higher for longer” scenario is biting harder and harder on consumers and corporates. In looking at how markets are trading against this backdrop, we’ve been tracking the sizable divergence happening in the S&P500. The S&P7, the seven biggest stocks in the index, are up 50% so far this year. Meanwhile the S&P493, the vast majority of stocks in the index, are essentially flat. The bottom line is that if you buy the S&P500 today, you are basically buying a handful of companies that have an average P/E ratio of around 50.

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.

S&P500 Bifurcation

From last week’s employment report, we learned that the US economy created 336,000 jobs in September—which was better than expected. In the week ahead, we will get CPI inflation data. The consensus expects headline inflation to come in at 3.6% and core inflation to come in around 4.1%—still above the Federal Reserve’s 2% inflation target. Taken together, we can assume that the Fed is not done with raising rates. This “higher for longer” scenario is biting harder and harder on consumers and corporates. In looking at how markets are trading against this backdrop, we’ve been tracking the sizable divergence happening in the S&P500. The S&P7, the seven biggest stocks in the index, are up 50% so far this year. Meanwhile the S&P493, the vast majority of stocks in the index, are essentially flat. The bottom line is that if you buy the S&P500 today, you are basically buying a handful of companies that have an average P/E ratio of around 50.

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.

S&P500 Bifurcation

From last week’s employment report, we learned that the US economy created 336,000 jobs in September—which was better than expected. In the week ahead, we will get CPI inflation data. The consensus expects headline inflation to come in at 3.6% and core inflation to come in around 4.1%—still above the Federal Reserve’s 2% inflation target. Taken together, we can assume that the Fed is not done with raising rates. This “higher for longer” scenario is biting harder and harder on consumers and corporates. In looking at how markets are trading against this backdrop, we’ve been tracking the sizable divergence happening in the S&P500. The S&P7, the seven biggest stocks in the index, are up 50% so far this year. Meanwhile the S&P493, the vast majority of stocks in the index, are essentially flat. The bottom line is that if you buy the S&P500 today, you are basically buying a handful of companies that have an average P/E ratio of around 50.

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.

S&P500 Bifurcation

From last week’s employment report, we learned that the US economy created 336,000 jobs in September—which was better than expected. In the week ahead, we will get CPI inflation data. The consensus expects headline inflation to come in at 3.6% and core inflation to come in around 4.1%—still above the Federal Reserve’s 2% inflation target. Taken together, we can assume that the Fed is not done with raising rates. This “higher for longer” scenario is biting harder and harder on consumers and corporates. In looking at how markets are trading against this backdrop, we’ve been tracking the sizable divergence happening in the S&P500. The S&P7, the seven biggest stocks in the index, are up 50% so far this year. Meanwhile the S&P493, the vast majority of stocks in the index, are essentially flat. The bottom line is that if you buy the S&P500 today, you are basically buying a handful of companies that have an average P/E ratio of around 50.

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.

S&P500 Bifurcation

From last week’s employment report, we learned that the US economy created 336,000 jobs in September—which was better than expected. In the week ahead, we will get CPI inflation data. The consensus expects headline inflation to come in at 3.6% and core inflation to come in around 4.1%—still above the Federal Reserve’s 2% inflation target. Taken together, we can assume that the Fed is not done with raising rates. This “higher for longer” scenario is biting harder and harder on consumers and corporates. In looking at how markets are trading against this backdrop, we’ve been tracking the sizable divergence happening in the S&P500. The S&P7, the seven biggest stocks in the index, are up 50% so far this year. Meanwhile the S&P493, the vast majority of stocks in the index, are essentially flat. The bottom line is that if you buy the S&P500 today, you are basically buying a handful of companies that have an average P/E ratio of around 50.

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.

S&P500 Bifurcation

From last week’s employment report, we learned that the US economy created 336,000 jobs in September—which was better than expected. In the week ahead, we will get CPI inflation data. The consensus expects headline inflation to come in at 3.6% and core inflation to come in around 4.1%—still above the Federal Reserve’s 2% inflation target. Taken together, we can assume that the Fed is not done with raising rates. This “higher for longer” scenario is biting harder and harder on consumers and corporates. In looking at how markets are trading against this backdrop, we’ve been tracking the sizable divergence happening in the S&P500. The S&P7, the seven biggest stocks in the index, are up 50% so far this year. Meanwhile the S&P493, the vast majority of stocks in the index, are essentially flat. The bottom line is that if you buy the S&P500 today, you are basically buying a handful of companies that have an average P/E ratio of around 50.

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.

Response Rates Continue to Decline

The quality of the incoming economic data continues to deteriorate, see chart below.

For example, the response rate to the Current Employment Survey, which collects data on nonfarm payrolls, is below 50%, and the response rate to the JOLTS survey, which collects data on job openings, is around 30%.

The implication for markets is more adjustments, more revisions, and ultimately more volatile data.

Response rates continue to decline
Source: BLS, Apollo Chief Economist

Asset-Backed Finance: The Next Evolution of Private Credit

Asset-backed finance (ABF) is a critical tool for financing day-to-day activities for millions of businesses and consumers globally. It comprises a broad set of credit types that touches everyday life from residential mortgages, credit cards and student loans, to planes, trains, automobiles, and more, collectively making up a $20 trillion-plus market today.1 While the growth of private credit has largely focused on corporate credit, we see ABF as a rapidly growing asset class that we believe is the natural progression of private credit.

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1 Source: Apollo Analysts as of December 2022.

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.

VC Valuations Down 50%

As the costs of capital have normalized, venture capital valuations have declined by 50%, see chart below.

US venture capital valuations are down 50% from the peak
Source: Bloomberg, Apollo Chief Economist. Note: The Refinitiv Venture Capital Index is designed to measure the value of the US-based venture capital private company universe in which venture capital funds invest.