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Wheat prices and barley prices are up 50% not only because Ukraine and Russia combined account for 30% of global wheat trade but also because of bad weather slowing the US spring wheat planting progress, see chart below.
Source: USDA, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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We have updated our credit market chartbook, and the conclusion is that the Fed wants to see wider spreads in both IG and HY to get inflation down. There is also a rising risk that Fed rate hikes will result in a recession, triggering additional spread widening for both IG and HY spreads.
The bottom line is that with inflation currently at 8% and the Fed’s inflation target at 2%, it is too early for markets to declare victory. Credit spreads need to go wider until we have certainty about inflation coming down to 2% and certainty that we will not have a hard landing.
Source: Bloomberg, Apollo Chief Economist. Note: Ticker used HYG US Equity and LQD US Equity. 
Source: Bloomberg, Apollo Chief Economist. Note: Index used LUACTRUU Index. See important disclaimers at the bottom of the page.
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The charts below show that traffic of prospective buyers of new homes is declining, homebuilder confidence is declining, weekly data for mortgage purchase applications has started to move down, consumer plans to buy a new home have softened, home sales are coming down from their recent peak, leading indicators for home prices are rolling over, and mortgage originations have started to come down, in particular for 30- to 49-year olds. These are all signs that the housing market has started to cool down. This is what the Fed would like to see. The question is if we will get a soft or a hard landing. View the full report.
Source: Bloomberg, Apollo Chief Economist 
Source: NAHB, Apollo Chief Economist 
Source: Mortgage Bankers Association, Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Fed: The anatomy of single-digit inflation in the 1960s
https://www.federalreserve.gov/econres/feds/files/2022029pap.pdfFed: Has the current lockdown in China affected the global supply chain?
https://www.kansascityfed.org/Economic%20Bulletin/documents/8821/EconomicBulletin22Nie0520.pdfECB: The rise of bond financing in Europe
https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2663~06c26039e0.en.pdfSee important disclaimers at the bottom of the page.
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I think there is a 75% chance we will have a recession. It is just not happening yet. Our high-frequency indicators show that air travel is still strong, hotel occupancy rates are high, restaurant bookings are strong, credit card spending is still strong, and the weekly data for bank lending is also trending higher.
Weekly jobless claims have started to move slightly higher in recent weeks, but this is consistent with the seasonal pattern. The weekly mortgage purchase applications data is modestly weaker, and we are watching the housing market very carefully.
The Fed’s goal is to cool down all these indicators, and they will ultimately succeed, so investors should continue to prepare for the coming slowdown.
Source: TSA, Bloomberg, Apollo Chief Economist 
Source: STR, Haver Analytics, Apollo Chief Economist 
Source: OpenTable, Apollo Chief Economist 
Source: Department of Labor, Bloomberg, Apollo Chief Economist 
Source: Mortgage Bankers Association, Bloomberg, Apollo Chief Economist 
Source: Redfin, Haver, Apollo Chief Economist 
Source: FRB, Haver, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Apartment rents in Manhattan are up 40% over the past 12 months, and the median rent is now $3,900, see charts below. The ongoing increase in housing costs across the country is beginning to have a negative impact on other types of consumer spending. The more money households have to spend on paying for their rent or mortgage, the less money is available for consumer discretionary purchases such as buying a new phone, replacing a washer or dryer, and eating at restaurants. The Fed is trying to cool down the economy, including the housing market, and they will succeed, and the risks are rising that we will get a U-shaped recession as the Fed keeps rates high to make sure inflation comes down from the current level of 8% to their 2% target.
Source: Elliman, Apollo Chief Economist 
Source: Elliman, Apollo Chief Economist 
Source: Elliman, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The number of people using the subway in New York City is still far below normal, see chart below.
Source: toddwschnieder.com, MTA, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The first chart below shows that many tech stocks are down 70%-80% from their peaks, the second chart shows how SG&A spending for many of these companies has increased dramatically in recent years, and the third chart shows that total employment in these companies has increased from around 300,000 in 2019 to about 450,000 today. The bottom line is that the bursting tech bubble will have significant negative consequences for the broader economy through layoffs, less spending on rents, and less spending on advertising.
Source: Bloomberg, Apollo Chief Economist (Note: SG&A is defined as the sum of all direct and indirect expenses (such as advertising expenses), general and administrative expenses (including rental expenses). 
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The price of airline tickets increased 19% from March to April, the daily TSA data for traveler throughput continues to grow, and Las Vegas visitor volumes continue to recover, see charts below.
With the economy reopening, significant household savings, and more people flying, eating at restaurants, and staying at hotels, the Fed has to increase interest rates further to slow down the consumer services sector.
Source: TSA, Bloomberg, Apollo Chief Economist 
Source: LCVCA, Bloomberg, Apollo Chief Economist 
Source: Bloomberg, Apollo Chief Economist. Note: Winnings includes total revenue from table, counter and card games and slot machines. See important disclaimers at the bottom of the page.
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The chart below shows inflation by frequency of purchase. Inflation for products we frequently buy, such as food, beverages, and gas, is currently running at close to 12%. Inflation for goods we buy infrequently, such as furniture, clothes, and cars, is running at 10%. Contractual inflation, such as housing and rent, is currently around 5%. Across all frequencies, the trend is higher and that is the reason the Fed is so hawkish.
Source: BLS, Apollo Chief Economics See important disclaimers at the bottom of the page.
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