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There are always upside and downside risks to the outlook. Below are five things we are watching going into 2026.
1. The US economy starts re-accelerating because of the fading trade war shock and the One Big Beautiful Bill, and inflation begins to move higher from an already high level.
2. The global industrial renaissance boosts global growth with more and more countries focusing on homeshoring advanced manufacturing capacity, investing in infrastructure, energy, defense and supply chains.
3. The new Fed Chair lowers interest rates purely for political reasons.
4. AI bubble bursting results in a major correction of Mag 7 equity prices and slows capex spending and high-end consumer spending.
5. Dramatic increase in the supply of fixed income in 2026, coming from growing government deficits and hyperscaler issuance, puts upward pressure on rates and credit spreads.
See important disclaimers at the bottom of the page.
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Swaption volatility remains very low despite significant debate about what the Fed will do at its next meeting, see chart below. In other words, the market is not expecting sharp moves in yields over the next three months.
Tickers: USSNAC10 and USSNAC2. Sources: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The CBO estimates that the One Big Beautiful Bill will boost GDP growth next year by 0.9%, see chart below. The main factor in the bill is that, starting January 1, 2026, businesses can immediately deduct capital expenses, such as investments in equipment and R&D. This is a major tailwind for the economy in 2026.
Sources: CBO, H.R. 1, One Big Beautiful Bill Act, Apollo Chief Economist See important disclaimers at the bottom of the page.
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European companies typically allocate more of their resources to tangible assets, such as property, plant and equipment, resulting in a higher tangible asset ratio than US companies. In contrast, US firms invest more heavily in intangible assets like software, brand value and intellectual property rights, see chart below.
Note: Tangible assets include fixed tangible assets like plants, equipment and property. Sources: Financial accounts of United Sates, FRB, Haver Analytics, EIB Investment Survey 2024, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The chart below shows what types of assets households own across the wealth distribution.
Households with lower asset holdings mainly own their home and their car. Wealthier households mainly own business assets and stocks.
Sources: Federal Reserve Survey of Consumer Finances, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The weekly data for US consumer spending continues to show solid growth in private consumption, see chart below.
In other words, there is no need for the Fed to cut rates to boost consumer spending.
Sources: Redbook Research Inc., Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Data from the Census Bureau and Ramp shows that AI adoption rates are starting to flatten out across all firm sizes, see charts below.
Note: Data is six-survey moving average. The survey is conducted bi-weekly. Sources: US Census Bureau, Macrobond, Apollo Chief Economist
Note: Ramp Al Index measures the adoption rate of artificial intelligence products and services among American businesses. The sample includes more than 40,000 American businesses and billions of dollars in corporate spend using data from Ramp’s corporate card and bill pay platform. Sources: Ramp, Bloomberg, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The chart below shows that foreigners come to the US to earn higher yields and invest in AI.
Since Liberation Day, foreign appetite for US assets has been robust. This is the reason why the US dollar has been trending higher over the past six months.
The chart below shows that since May, foreigners have been strong buyers of AI and US fixed income, including credit.
With rates higher for longer and the AI story continuing, foreign demand for US assets will remain strong.
Sources: US Department of Treasury, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Bitcoin and the Nasdaq Composite are normally highly correlated, but that correlation has broken down in recent weeks with a much sharper drop in the price of Bitcoin, see chart below.
Sources: Nasdaq, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Since 2009, the total amount of public IG and HY bonds outstanding has grown from $3 trillion to $11 trillion, see chart below. Most of the growth has been in BBB and A-rated corporate bonds, and those two ratings combined now account for 79% of all corporate bonds outstanding by market value.
These numbers have to be compared with the roughly $2 trillion outstanding in private credit, up from $1.2 trillion in 2009.
The bottom line is that public credit markets have grown much faster than private credit markets both in percent and in dollars.
Sources: ICE BofAML, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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