I have to say the biggest pathbroke because we've seen over the past few weeks, didn't come from the world attack at all. They came from the world of retail. I keep going back to that meeting several mondays ago in Washington, d c. Between the biggest retail is in this country and the President of the United States, which many people believe led to the truth we saw over the weekend.
And the threat of empty shelves heading into the back to the school season. And we just heard from Gene Soroca that still is a question mark is companies try to figure out the new landscape that they're trying to order.
In the fact that Walmart's CFO is saying that price hikes from tariffs may start this month, This coming out in news reports right now gives you a sense of the pressures that are going to be building at a time or even though tariff rates have come down from some of the worst case scenarios, they still are materially higher than where they were at the start.
Of the year.
That's a warning from Walmart this morning. Here's a view on Wall Street. Jim Zeltzer, the president of Apollo Global Management, weighing in on the administration's trade regime. The last time he joined us, saying this globalization is not going to be like we have seen it in the past. It is a new global world order and places safe for them. Next thirty minutes, Jim's ounce joins us this morning, Jim.
Good morning, Good morning.
It's a phrase you used last time around that's stuck with both of us. We've been repeating it over the last several weeks. Macro paralysis. Can you adjust that term?
Now?
What phrase would you use to describe this moment?
First of all, it was good to be here. I think I would frame it right now, is a macro political pivot the administration clearly, I agree. I think that Monday meeting with the retail executives was a I don't want to call it watershed, but it was a critical moment for the administration to hear about the challenges on the ground of their plan. And the administration certainly is not admitted they made a mistake, but they've clearly pivoted.
And that's not a surprise. And it's not a surprise that they're out going around the globe right now trying to and successfully inking a lot of deals. A lot of MOUs that are non binding, but certainly it's great headlines and it's hundreds of billion, if not trillions. But so that's where I think, and I think the big question now is I'll pull back in the COVID library.
There's a big gap.
Between confidence sentiment and the results and confidence and sentiment is still pretty negative or concerned, but the results have been pretty strong, and so there's a very if you think about you know, we're all, you know, history of the past, and we see signs of what we've seen in the past, and pattern recognition if you will, and you know, if you input all the things that you see right now, you would have been saying recession went
from thirty percent to seventy eighty percent. Now it's probably below fifty percent.
But the three.
Questions are does the consumer do corporates and countries are they going to be on the V shape recovery, the U shape recovery or the L shape recovery.
Our view at A.
Paula is right now that the consumer is still pretty strong, a bit of a V shape recovery. Corporate's a bit of a U shape recovery because a lot of CAPEX and I've been traveling around quite a bit, and I think the global response is a bit more like the l and what you pointed out earlier, what Amory did with Tim Cook. I am not surprised. None of us should be surprised that this administration is going to put their arm around all these tech titans and other leaders and saying come to America.
China was not the plan.
We didn't love the idea of going India, come back to the US. This is going to be a theme that they're going to keep hitting hitting.
Is there enough of a framework that you're gleaning from this administration that's solid to bring deal making back. We've seen on the margins some deals being made, some IPOs, there are just a few. Is this the beginning?
Well, I think let's separate the headlines from activity. It's been an incredibly active time for folks that have involved in the markets. You know, we at Apollo, we opened up the IPO market. We brought out Aspen, one of our reinsurers for an IPO. We did a multi billion dollar deal for a lot of America igt every We announced a big merger between New Home and a Land and Sea.
So there's been a lot.
Of transactions since April second. I know the headlines may show contrary, but there's been a tremendous amount of financing and I think it shows the depth and breadth of the markets right now because of private capital in the equity and the credit world.
So this idea that.
The markets shut down, that's actually what happened two decades ago. Two decades ago, the high yield market would go into periods six, eight, ten weeks where there would be no issuance based on the flows from retail the old AMG number. So this economy, this capital markets is very robust, obviously of a lot of volatility. One of the benchmarks in
our market would be HyG, the high Yield Index. The listed HyG ETF that went from basically seventy nine to eighty down to seventy three, seventy four back to seventy nine is in a round trip. But there's been a tremendous amount of activity underneath the headlines.
How much do you think this is because people see the environment as being brighter than some may worry, And how much do you see this as just simply pent up demand that's been backed up for a long time. There is this sort of cyclical move toward industrialization, and you have that kind of fundraising that is kind of independent of any economic cycle.
I think the bigger long term trends of massive, massive cappex the year or two of cappex.
Global industrial renaissance.
The demographics every asset class is higher today as we sit here this morning than it was on Liberation Day, except for treasuries, which have ten years basically thirty basis points higher and the thirty year about forty basis points higher, about five, fifteen and six percent, respectively. That's telling you that folks think that the economic backdrop is not going to be a recession. It's going to be slow to moderate growth. And that's what you're seeing right now in
the market. So that's what we're seeing from our companies. We're seeing a lot of concern, a lot of handeringing about big strategic M and A transactions. I don't think you're going to see a massive equity calendar except for a few large deals here and there. But the reality is companies need to operate, finance, and grow, and they're positioning themselves for an environment that the administration's putting forth.
This is what companies need let's spend some time talking about what investors need. Never mind the rebound. What did you learn from the drawdown public versus private?
Well, what you saw is that I come up here a lot and talk about market structure, and what you're finding right now is that longer dated capital is us and many of our peers have long dated insurance assets. Those were the folks that were the most active during the marketplace, and they were a bit of the buffer if you would. You know, we put about twenty seven billion to work in the IG market from April second to last week. That's on a growth basis about net
about seventeen eighteen billion. I think in the past that participant was not in the market as much, and the buffer from the Wall Street bank trading desk taking that balance. I think that we collectively as an industry helped out so that you didn't see as much polatiley. There's a lot of there's a lot of cash on the sidelines. There's a tremendous amount and again as you see what's going on right now around the globe with you know, the pension assets, DC assets, other assets, really trying to
get long duration, long duration assets against their liabilities. It's really really critical. I mean, the one big overhang it's still in the market is what's going on the treasury market. You know, certainly if you pivot right now to what's going on with the budget issues in DC, it doesn't look like they have a clear path to a deal that would be really de leveraging to the US over time.
Now Bessen is saying a lot of great things, but treasury rates are higher, and you know, as we've as we've been saying, the one real leftail risk for this administration is the Liz Trust moment. Is that still out there. It's not a zero, it's not a big number, but it's a left tail risk for this administration.
Can we ask you what you think that looks like? What does a List trust moment look like? In the treasury market?
You know, it's the deepest, most liquid, broadest market in the world's and I don't really participate day to day, so I'm not it really is.
It's a confidence.
Issue, and it's when that stream of confidence goes from not being substantial to being a little bit more material. And I don't know what that number is, but certainly it's got to be in the back of the head of the administration, and again the prior administration did not really extend duration in their liability. So there's I think, I don't know if it's seven or nine trillion of refinancing over the next twenty four months. It's a big number.
But these rates are real. Rates are real in terms of where they are right now, So you are finding buyers of that paper, but it is a challenge.
In the backdrop, there is this belief that private credit markets offer this ballast, the sort of haven from some of the volatility that we're seeing in public markets and in particular from the treasury market. At the same time, how can you say that private debt in particular is really immune to the fluctuations and the sucking sound of capital into the treasury market given all of that issuings.
Well, I'd say two things, and this is a longer conversation that I do want to get into. The real rates are higher, and if you can in private credit, private credit, you know, high single digits, low double digits on a compounding basis, it's a tremendous asset class over
a decade or two. I really want to spend some time with you both this morning talking about these comments about private credit being a bubble, you know, that's just a mistake in comment and when you really break it down, as I said before, private credit in the traditional manner, the narrow manner is the higher market, the leverage loan market, and now the emerging direct lending market. When people talk
about a credit bubble, it's just not the case. What they are talking about is there could be a credit cycle.
That's normal. We haven't had one in a long time.
But that credit cycle will impact debt and leverage balance sheets, high yield leverage loans, and direct lending. It'll also affect private equity. It'll affect equity multiples. But it's not a bubble per se. It's a good old recession and a credit cycle. We're going to have one of those. It may be pushed out again a year or two, but let's not go out there. I think folks that are not in private credit or private capital say, oh, it's a bubble because they're not involved. But the reality is
there's lots of opportunities. There's a massive amount of opportunities. We were very active last month. Boeming decided to spin off its aircraft one of its businesses. We worked in conjunction with City on it multi billion dollar deal, a tremendous asset heated auction. There's opportunities for real companies, but there will be a credit cycle still.
With a Jim's outse of Apollo Global Management, Jim, we talked about the prospect of a credit cycle. How can we have a credit cycle when we're running deficits this ladge in Washington.
Well, I mean, as I said before, we've been waiting for those who have been professionals in this sector for decades would have expected a few things right now, and I've talked about pattern recognition. I was here several years ago talking about the rate hike and how that would create a tighter a period of tighter financial conditions, and many of us that were expecting as serious credits cycle, you know, predicted something that didn't occur because of the
macro backdrop. You know certainly right now is we have a higher rate environment, which means a bit of economic strength in.
The overall economy.
There always are a number of companies that just have too much leverage and are not going to grow out of their balance sheets, and you're going to see that. Last year, the last couple of years, you had actually fairly high numbers of restructurings and non investment great credit. It just didn't overwhelm the headlines because the overall returns
and the strength of the equity market. But I do think there are you know, I said before, here's there's a when you look at back in the last four or five years in private credit direct lending, a lot of the largest sector of financing was technology and enterprise software. And I do think that there's a possibility with what's going on with AI that many of these companies could
really have massive impact on their operating business. The renewal rates there are seven or eighty ninety ninety five percent could plummet dramatically, and I could see a variety of challenges in the enterprise software tech space that have been a big, big area of private credit. And I think there will be those who are not involved will say, Aha, there was a problem, it's a hoax.
That's not the case.
It was just bad companies overlevered that didn't grow out of their balance sheet, and that happens every day in the equity market in other markets. But you know, again, as much as we are a player in the insurance balance sheets on sale yield. We also do play in that risk your end, and I don't see a massive credit cycle happening in twenty five. Certainly we've taken care of a lot of the refinancing risks. That refinancing cliff that was pretty large in twenty six and twenty seven.
It's been pushed out, but.
We're not seeing although the risk premiums have raised have been raised. And I will tell you there's a very large US based retailer based here in New York that has undergone a transformational merger. They had a private credit solution in front of them, which we were quite involved with. They decided to go to the public markets and issue a public bond in this safe public markets, and that
bond today within six months is trading below fifty. So again, I think there's a lot of noise about risk and reward and various asset classes, but that's our view of private credit.
Just quickly, how much could hire long term US yields spur that credit cycle.
I won't call it a bubble, because we could talk about what a bubble is or what we could see with some sort of just negative price action, But do you see that as being a catalyst.
Well, I think that the overall listen were having higher real rates are good for long term investors to a certain degree. They're good for a certain degree until we lose confidence in the actual underlying market. Again, the US treasure market deepest, most liquid in the world. Rates of four and a half and five percent with real rates right now pretty strong on a relative basis over the last twenty five years, but I'm not seeing that in the current zip code.
Just to wrap it up, biggest opportunity right now for you in the team, what do you think it is?
Well, I think it's a few places.
I do think the volatility that has taken most people on the sidelines and a bit of a paralysis just operating day in and day out on the business that we do. Right now, we have eight hundred and fifty billion the capital doing a lot of refinancing with PE firms as well, two thousand PE situations where they've owned companies more than five years. A lot of refinancing there. This is the global industrial renaissance is alive and well
in the US. With the delay in deploying the Chips Act, a lot of financing on shore of chip manufacturing and other assets. I've been traveling around the globe quite a bit. You know, Japan is still quite interesting from a insurance perspective, from a global wealth perspective, and a Pe perspective. And we cannot forget about Europe. I mean Europe really is what's going on there. It's a once in a generation.
I do believe that there's a variety. When you look at a thirty trillion economy in the US twenty four trillion in Europe, there's a massive amount of financing to occur.
You've been traveling too much. It's going to have you back.
Good to be back.
Welcome back to New York. Jym's outer of Apollo Global Management, Jim, Thank you, sir,