APOLLO ACADEMY

2024 Economic and

Capital Markets Outlook:
What’s Next After the “Fed Pivot”?

Torsten Sløk, PhD

Apollo Chief Economist

December 2023

Unless otherwise noted, information as of December 2023.

Confidential and Proprietary – not for distribution, in whole or in part, without the express written consent of Apollo Global Management, Inc.
It should not be assumed that investments made in the future will be profitable or will equal the performance of the investments shown in this document. ATLWAA-20231218-3270002-10442754
APOLLO ACADEMY

• The Fed December Surprise

• We See Rates Staying Higher and for Longer

than the Market Expects

Topics We Will Cover • The End of Excess Savings

• Outlooks:
Consumer Spending, Corporate Performance,
Job Growth, Bank Lending, Inflation, Interest Rates

• Investment Implications

ATLWAA-20231218-3270002-10442754
APOLLO ACADEMY

The Fed December surprise: Pivots to dovish stance, signals three rate cuts in 2024

Implied Fed funds target rate, end of 2024

%

6.0

5.0

4.0

3.0 Fed sees the

Fed funds rate at
4.6% by the end
of 2024
2.0

1.0

0
09/22/21 12/15/21 03/16/22 06/15/22 09/21/22 12/14/22 03/22/23 06/14/23 09/20/23 12/13/23

Data as of December 14, 2023.

Sources: Bloomberg, Federal Reserve Board
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. ATLWAA-20231218-3270002-10442754 3
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.
APOLLO ACADEMY

What’s the expected impact of the “Fed pivot” on US GDP?

Shock to GDP level, compared to baseline forecast

% Difference from
baseline forecast

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0
4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 2Q25 3Q25 4Q25 1Q26 2Q26 3Q26 4Q26
-0.2

LOWER OIL PRICE LOWER VIX TIGHTER IG CREDIT SPREADS FED FORWARD GUIDANCE TOTAL (SUM OF SHOCKS)

Data as of December 14, 2023.

Note: $20 oil price decline, 60bps tighter IG spreads, 1std decline in VIX, and 100bps lower rates via changed Fed forward guidance.
Sources: Bloomberg, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 4
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.
APOLLO ACADEMY

We See Rates Staying Higher and for

Longer than the Market Expects

ATLWAA-20231218-3270002-10442754
APOLLO ACADEMY

Inflation remains sticky, the “last mile” to 2% expected to be harder

Core CPI
%

10

0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

YOY 6 MONTH CHANGE 3 MONTH CHANGE

As of December 2023. Note: Core CPI includes prices for a basket of consumer goods, except food and energy, and is released by BLS. Its weightings are updated annually.
Three- and six-month annualized change uses seasonally adjusted figures. Source: Labor Department
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. ATLWAA-20231218-3270002-10442754 6
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.
APOLLO ACADEMY

Treasury auction sizes in 2024 expected to increase on average 23% across the yield curve

Treasury issuance across tenors

$bn

900

800

700

600

500

400

300

200

100

2s 3s 5s 7s 10s 20s 30s

2013 2018 2023 2024

As of November 29, 2023. Note: Estimates from November 2023 to December 2024 from the TBAC neutral issuance scenario. Sources: SIFMA, TBAC, Haver Analytics, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 7
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.
APOLLO ACADEMY

US government interest payments per day have doubled from

$1 billion before the pandemic to almost $2 billion in 2023
Net interest expense per day on public debt
$bn

1.9

1.7
1.8
1.5

1.3

1.1 1.3
0.9 1.0 1.0
0.9
0.7

0.5
2019 2020 2021 2022 2023

As of November 29, 2023. Note: Interest rate assumption by CBO: 2.1% in 2022 and 2.7% in 2023. Annual CBO data divided by 365. Sources: CBO, Haver Analytics, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 8
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.
APOLLO ACADEMY

Why are interest rates so high?

Because the 10-year Treasury “term premium” has risen
10-year Treasury term premium

%
5

-1

-2
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

As of November 29, 2023. Shaded areas indicate recessions. Sources: Bloomberg, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 9
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.
APOLLO ACADEMY

Chinese exports are slowing

China export trade USD

% YoY

150

120

90

60

30

-30

-60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

As of November 29, 2023. Sources: Bloomberg, Apollo Chief Economist

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. ATLWAA-20231218-3270002-10442754 10
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.
APOLLO ACADEMY

China is holding $300 billion less in US Treasuries than in 2021

Holdings of US Treasury securities

$ bn $ bn

1400 1400

1200 1200

1000 1000

800 800

600 CHINA 600

400 400

200 200

0 0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

As of November 29, 2023. Sources: Bloomberg, Apollo Chief Economist

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. ATLWAA-20231218-3270002-10442754 11
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.
APOLLO ACADEMY

It’s not just China, either

Foreign holdings of US Treasury securities as a share of outstanding public debt

% %
40
40% 40%

35
35% 35%

30
30% 30%

25
25% 25%

30
20% 20%

15
15% 15%

10%
10 10%

5%
5 5%

0%
0 0%
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021

As of November 29, 2023. Sources: Treasury, Haver Analytics,, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 12
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.
APOLLO ACADEMY

Foreign private sector investors are slowing their purchases of US Treasuries

Net foreign purchases: Treasury bonds and notes

$ bn, trailing 12 months

1000

800

600

400

200

-200

-400

-600
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

PRIVATE OFFICIAL

As of November 29, 2023. Sources: Treasury, Haver Analytics, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 13
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.
APOLLO ACADEMY

The End of Excess Savings

ATLWAA-20231218-3270002-10442754
APOLLO ACADEMY

US households are running out of excess savings

Accumulated excess savings

$trn
Months since start of recession
2.5

2.0

1.5

1.0

0.5

0.0

-0.5
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

1970 1980 1990 2001 2008 2020

As of November 29, 2023. Note: Excess savings are calculated as the accumulated difference between actual personal savings and the trend implied by data for the 48 months leading up to the first month of each recession, as defined by the National Bureau of Economic Research.
Sources: BEA, Haver Analytics, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 15
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.
APOLLO ACADEMY

US corporate earnings expectations continue to rise

S&P 500 12-month forward EPS expectations

%YoY

250

240

230

220

210

200

190
Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23 Jun-23 Aug-23 Oct-23

As of November 29, 2023. Sources: Bloomberg, Apollo Chief Economist

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. ATLWAA-20231218-3270002-10442754 16
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.
APOLLO ACADEMY

There was a jump in the share of households having difficulties

paying expenses in October
% of population

40

38

36

34

32

30

28

26

24

22
Mar-21

Mar-22

Mar-23
Apr-21

Apr-22

Apr-23
Jun-21

Jun-22

Jun-23
Dec-20

Dec-21

Dec-22
Feb-21

Feb-22

Feb-23
Jan-21

Jan-22

Jan-23
May-21

May-22

May-23
Aug-21

Aug-22

Aug-23
Jul-21

Jul-22

Jul-23
Nov-20

Nov-21

Nov-22

Nov-23
Sep-20

Sep-21

Sep-22

Sep-23
Oct-20

Oct-21

Oct-22

Oct-23
SOMEWHAT OR VERY DIFFICULT PAYING HOUSEHOLD EXPENSES IN LAST WEEK

Note: Gaps in the above chart do not indicate a lack of difficulty paying expenses but rather a lack of survey data from that month. Sources: Census Bureau Household Plus Survey, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 17
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.
APOLLO ACADEMY

Outlook for Consumer Spending

ATLWAA-20231218-3270002-10442754
APOLLO ACADEMY

The interest rate on credit card debt has topped 20% and is still rising…
Credit cards assessed interest

% %

24 24

22 22

20 20

18 18

16 16

14 14

12 12

10 10
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

As of November 29, 2023. Sources: Federal Reserve Board, Haver Analytics, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 19
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.
APOLLO ACADEMY

…resulting in higher credit-card delinquency, especially for younger consumers

Credit-card transitions to serious delinquency (90+), by age

% balance, 4Q moving sum % balance, 4Q moving sum

16 16

14 14

12 12

10 10

8 8

6 6

4 4

2 2

0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

70+ 60-69 50-59 40-49 30-39 18-29

As of November 29, 2023. Sources: New York Fed Consumer Credit Panel/Equifax, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 20
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.
APOLLO ACADEMY

Small banks are feeling the delinquency pinch much more than large banks

Delinquency rates on consumer credit cards

% %

8 8

7 7

6 6

5 5

4 4

3 3

2 2

1 1
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

100 LARGEST COMMERCIAL BANKS OTHER BANKS

As of November 29, 2023. Sources: Federal Reserve Board, Bloomberg, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 21
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.
APOLLO ACADEMY

Interest rates on auto loans are also spiking…

Commercial bank auto-loan rates

% %
9.0 9.0

8.5 8.5

8.0 8.0

7.5 7.5

7.0 7.0

6.5 6.5

6.0 6.0

5.5 5.5

5.0 5.0

4.5 4.5

4.0 4.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

48 MONTH AUTO LOAN RATE 60 MONTH AUTO LOAN RATE

As of November 29, 2023. Sources: Federal Reserve Board, Bloomberg, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 22
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.
APOLLO ACADEMY

…with the result that auto-loan delinquencies are approaching 2008 levels

Auto-loan transitions to serious delinquency (90+), by age

% balance, 4Q moving sum % balance, 4Q moving sum

6 6

5 5

4 4

3 3

2 2

1 1

0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

70+ 60-69 50-59 40-49 30-39 18-29

As of November 29, 2023. Sources: Federal Reserve Board of New York Consumer Credit Panel, Equifax, Haver Analytics, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 23
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.
APOLLO ACADEMY

Futures markets are predicting that the Fed will begin cutting rates in March 2024

CME FedWatch Tool – Total Probabilities

DAYS TO NO
MEETING DATE MEETING EASE CHANGE HIKE

1/31/2024 47 18.60% 81.40% 0.00%

3/20/2024 96 77.21% 22.79% 0.00%

5/1/2024 138 96.99% 3.01% 0.00%

6/12/2024 180 100.00% 0.00% 0.00%

7/31/2024 229 100.00% 0.00% 0.00%

9/18/2024 278 100.00% 0.00% 0.00%

11/7/2024 328 100.00% 0.00% 0.00%

12/18/2024 369 100.00% 0.00% 0.00%

As of December 14, 2023. Source: CME FedWatch Tool

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. ATLWAA-20231218-3270002-10442754 24
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.
APOLLO ACADEMY

Outlook for Corporate Performance

ATLWAA-20231218-3270002-10442754
APOLLO ACADEMY

A default cycle has started among the most leveraged corporate borrowers

US speculative grade default rates

%, Trailing 12 months

16
16%

14
14%
Fed starts
12%
12 raising
rates
10
10%

8
8%

6
6%

4
4%

2
2%

0
0%
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

LOANS HY BONDS

As of November 29, 2023. Sources: Moody’s Analytics, Apollo Chief Economist

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. ATLWAA-20231218-3270002-10442754 26
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.
APOLLO ACADEMY

The median coverage ratio for investment-grade corporates is declining…

Interest coverage ratio for US investment grade index

EBITDA/Interest Expense

9.5 9.5

9.0 9.0

8.5 8.5

8.0 8.0

7.5 7.5

7.0 7.0

6.5 6.5

6.0 6.0

5.5 5.5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

As of November 29, 2023. Note: US IG Index is ICE BofAML US Corporate Index, which consists of investment-grade corporate bonds that have a remaining maturity of greater than or equal to one year and have $250 million or more of outstanding face value.
Sources: Bloomberg, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 27
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.
APOLLO ACADEMY

…as is that of high-yield borrowers

Interest coverage ratio for high yield index

EBITDA/Interest Expense

7.0 7.0

6.5 6.5

6.0 6.0

5.5 5.5

5.0 5.0

4.5 4.5

4.0 4.0

3.5 3.5

3.0 3.0

2.5 2.5

2.0 2.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Data as of November 29, 2023. Note: High Yield Index is ICE BofAML US High Yield Index, which tracks the performance of US dollar denominated below investment grade debt publicly issued in the US domestic market.
Sources: Bloomberg, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 28
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.
APOLLO ACADEMY

US venture capital valuations are down 50% from their peak

Refinitiv Venture Capital index
Index

22500

17500

12500

7500

2500
2016 2017 2018 2019 2020 2021 2022 2023

As of November 29, 2023. 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.
Sources: Bloomberg, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 29
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.
APOLLO ACADEMY

Nearly half of Russell 2000 companies have negative earnings

% %

50 50

45 45

40 40

35 35

30 30

25 25

20 20

15 15

10 10
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

PERCENTAGE OF COMPANIES IN RUSSELL 2000 WITH NEGATIVE EARNINGS (12-MONTH TRAILING EPS)

As of November 29, 2023. Sources: Bloomberg, Apollo Chief Economist

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. ATLWAA-20231218-3270002-10442754 30
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.
APOLLO ACADEMY

Outlook for Job Growth

ATLWAA-20231218-3270002-10442754
APOLLO ACADEMY

Since the Fed started raising rates, employment growth has slowed

Change in nonfarm payroll employment

thous, three-month moving avg

Fed starts
700
raising rates

600

500

Consensus
400 forecasts

300

200

100

0
Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24

As of November 29, 2023. Sources: BLS, Haver Analytics, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 32
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.
APOLLO ACADEMY

Big borrowers have big payrolls

Employment in the companies in the high yield index and the leveraged loans index

mn

12

10

8
10.6
6
8.2
4

0
High yield Leveraged loans

As of November 29, 2023. Note: Data includes 842 companies in the HY index with employment data available for 584 companies and median employment assumed for the rest. Similarly, there are 1073 companies in the leveraged loans index with employment data available for 450
companies and median employment assumed for the rest. Sources: Bloomberg, ICE BofAML US High Yield Index, Morningstar LSTA Index, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 33
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.
APOLLO ACADEMY

Fed hikes have bigger impact on weaker balance sheets

CORPORATE HOUSEHOLD
balance sheets balance sheets
(credit rating) (FICO score)

AAA S T RO N G 850
balance
sheets

Firms and households BBB 600 Over time, more and

with low credit ratings more balance sheets
and low FICO scores are can be negatively
more vulnerable to Fed impacted by Fed hikes.
hikes because of: The ultimate result is
WEAK a weakening of the
• More debt
CCC balance 300 macro data such as capex
• Lower earnings sheets spending, employment,
• Lower savings and consumer spending.

Source: Apollo Chief Economist

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. ATLWAA-20231218-3270002-10442754 34
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.
APOLLO ACADEMY

Outlook for Bank Lending

ATLWAA-20231218-3270002-10442754
APOLLO ACADEMY

Small and large bank lending growth is slowing rapidly

Loans and leases: bank credit

% YoY
Fed starts SVB
20%
20 raising
rates

15%
15

10%
10

5%
5

0%
0

-5%
-5

-10%
-10
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

SMALL DOMESTIC COMMERCIAL BANKS LARGE DOMESTIC COMMERCIAL BANKS

As of November 29, 2023. Sources: Federal Reserve Board, Haver Analytics, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 36
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.
APOLLO ACADEMY

Outlook for Inflation

ATLWAA-20231218-3270002-10442754
APOLLO ACADEMY

The story hasn’t changed: Inflation is not yet at 2%

%YoY

4 Inflation
Target:
2%
3

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

CORE PCE CORE CPI

As of December 2023. Note: Core CPI includes prices for a basket of consumer goods, except food and energy, and is released by BLS. Its weightings are updated annually. Core PCE, the Fed’s preferred measure of inflation, is updated more frequently, and is released by BEA.
Sources: BLS, BEA, Haver Analytics, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 38
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.
APOLLO ACADEMY

Consumers’ next-year inflation expectations have rebounded sharply

6.0

5.5

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

5-10 YR INFLATION EXPECTATIONS: MEDIAN INCREASE 12-MONTH INFLATION EXPECTATIONS: MEDIAN INCREASE

As of November 29, 2023. Sources: University of Michigan, Haver Analytics, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 39
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.
APOLLO ACADEMY

Outlook for Interest Rates

ATLWAA-20231218-3270002-10442754
APOLLO ACADEMY

Rates are seen as remaining permanently higher

%

-1
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028

FED FUNDS RATE SOFR FUTURES ECB POLICY RATE EURIBOR FUTURES

As of December 14, 2023. Sources: Bloomberg, Apollo Chief Economist

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. ATLWAA-20231218-3270002-10442754 41
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.
APOLLO ACADEMY

FOMC members continue to increase their estimate of the long-run fed funds rate

4.00

3.75

3.50

3.25

3.00

2.75

2.50

2.25
2015 2016 2017 2018 2019 2020 2021 2022 2023

LONGER
LONGER RUN
RUN FOMC
FOMC SEP
SUMMARY
FOR THEOFFED
ECONOMIC
FUNDS RATE:
PROJECTIONS
CENTRAL FOR
TENDENCY,
THE FEDMIDPOINT
FUNDS RATE

Data as of November 29, 2023. Note: This series represents the midpoint of the central tendency of estimates; central tendency excludes the three highest and three lowest boardmember projections for each year.
Sources: Federal Reserve Board, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 42
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.
APOLLO ACADEMY

Investment Implications

ATLWAA-20231218-3270002-10442754
APOLLO ACADEMY

Forecasters see a meaningful chance of a recession in the US

Probability of recession

100

80

60

40

20

0
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Jul-23 Oct-23

CN EU US UK

As of November 29, 2023. Sources: Bloomberg Apollo Chief Economist

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. ATLWAA-20231218-3270002-10442754 44
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.
APOLLO ACADEMY

Private credit: Corporate borrowing costs have increased meaningfully

Today's yields are highest in the last 15 years except for the Great Financial Crisis and 16 trading days in March-April 2020

18
COVID-19:
11.1%
16

14
Fed Announces Energy Crisis: Trade War TODAY:
Extended Zero 7.1% with China: 9.7%
Rate Policy: 8.1% 7.6%
12

10

2008-2009
6 Avg: 12.4%

4
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

As of November 29, 2023. Note: Credit Suisse Leveraged Loan Index. Source: Bloomberg
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. ATLWAA-20231218-3270002-10442754 45
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.
APOLLO ACADEMY

Private equity: Opportunity to invest in asset classes that can offer a hedge
against inflation
Quarterly returns of S&P 500 vs infrastructure by inflation tercile, 2008–2022

5.0%
4.4%
4.0%
3.9%

3.0%

2.2% 2.1%
2.0%

1.0% 1.0%
1.0%

0.0%
Lowest Inflation Tercile (0.6%) Middle Inflation Tercile (1.9%) Highest Inflation Tercile (4.6%)

S&P 500 PREQIN INFRASTRUCTURE

Sources: Bloomberg, US Bureau of Labor Statistics (for US Consumer Price Index, CPI), Preqin Infrastructure; 2008-2022
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. ATLWAA-20231218-3270002-10442754 46
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.
APOLLO ACADEMY

Real assets: Pockets of relative value

1 2 3

UNLEVERAGED RATES WE REMAIN WARY OF WE DO SEE OPPORTUNITIES

of returns on real estate credit office for a variety of reasons, in more niche real estate assets,
look attractive when including work-from-home. including hospitality in certain
compared to equity. locations, manufactured housing
in the US sunbelt, and cold storage.

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. ATLWAA-20231218-3270002-10442754 47
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.
APOLLO ACADEMY

Public markets: According to the equity risk premium, the stock market is the
least attractive it has been in the past twenty years
Percentage Points

8 8

6 6

4 4

2 2

0 0

-2 -2

-4 -4

-6 -6
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

DIFFERENCE
DIFFERENCEBETWEEN
BETWEENS&P
S&P500
500EARNINGS
EARNINGSYIELD
YIELDAND
AND1010-YEAR
YEAR TREASURY
TREASURYYIELD
YIELD

As of November 29, 2023. Sources: Bloomberg, Apollo Chief Economist

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. ATLWAA-20231218-3270002-10442754 48
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.
APOLLO ACADEMY

Public markets: This is a very divergent public stock market

S&P 500 index performance

% change since Jan 2023

80

70

60

50

40

30

20

10

-10
Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23

S&P7 S&P493

As of November 29, 2023. Note: The S&P7 are Apple, Microsoft, Alphabet, Amazon, NVIDIA, Meta, and Tesla. Sources: Bloomberg, Apollo Chief Economist
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. ATLWAA-20231218-3270002-10442754 49
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.
APOLLO ACADEMY

Key Takeaways

A variety of both Households are Delinquency rates Despite recent A permanent Going into 2024,
economic and non- running out of for consumers moderation, increase in the we still see upside
economic forces are excess savings and are going up, it is still too early to risk-free rate risks to inflation
combining to keep student loan corporate coverage declare victory over has important and downside risks
interest rates high, payments are ratios are going inflation. implications for to growth.
and will likely restarting. Although down, default rates firms, households,
continue to do not tied to the are going up, and and asset allocation
so, even if the Fed’s tightening banking sector loan across equities and
Fed’s tightening campaign, they growth is slowing. fixed income.
campaign is near will nonetheless
or at its end. likely prove to be a
drag on economic
growth in the
months ahead.

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.
ATLWAA-20231218-3270002-10442754 50
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.
APOLLO ACADEMY

Important Disclosure Information

ATLWAA-20231218-3270002-10442754
APOLLO ACADEMY

Important Disclosure Information

All information herein is as of December 2023 unless otherwise indicated.
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 authors of the White Paper, speakers of the video and Apollo Analysts. 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 Index (S&P 500) is a market-capitalization weighted index of the 500 largest US publicly traded companies and one of the most common benchmarks for the broader US
equity markets.
Additional information may be available upon request.
Past performance not necessarily indicative of future results.

ATLWAA-20231218-3270002-10442754 52