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Despite a strong economy, corporate borrowers are still facing stress.


Feb 13, 2024

The Open Streets program in New York City has provided a welcome opportunity for people to walk along Fifth Avenue as depicted in an image from December 18, 2022.

Amid an otherwise healthy US economy, there are some areas of concern according to Apollo Global Management co-president Jim Zelter. He notes that many corporate borrowers are struggling with high levels of debt and a slow recovery from the COVID-19 pandemic. Zelter also see signs of economic conditions across the board hardening. Despite this, he says private equity and financing activity has been intense over the past several years with only minor challenges emerging at the margins. However, Zelter does warn of these “pockets of stress” in the economy, particularly as a surprise default rate of 5% occurred while the equity market surged 20% late last year.

While the Federal Reserve has pushed back on its rate-cutting timelines, many on Wall Street still hope for a rate cut in May as suggested by a collection of recent strong economic indicators. The fourth quarter of last year saw a GDP surge of 3.3% and a lower-than-expected unemployment rate of 3.7%. However, unexpectedly strong economy data continues to push back expectations for any near-term rate cuts. With a January consumer price index data showing inflation at a rate of 3.1% on an annualized basis, only slightly lower than the previous rate of 3.4%, it’s clear that there are still signs of inflation as well.

By Editor

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