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August 29, 2026
Partner, Chief Economist
The risks are rising that long rates six months from now could be a lot lower than where they are today.
Long rates are high today because of inflation and fiscal problems. But these forces could end up being dominated in early 2027 by what happens to AI, see the first chart below.
If AI succeeds and tech companies generate trillions in revenue, AI will be massively deflationary and push rates lower.
If AI does not work out, the bubble bursts and the Nasdaq is down 50% as investors rotate out of equities into Treasuries and long rates fall dramatically.
Over the next six months, the market will make up its mind about which AI scenario is playing out.
The bottom line is that financial markets are driven by narratives. The narrative in rates today is all about inflation and fiscal problems. But the narrative going into 2027 is going to be all about either the success or failure of AI. And in both scenarios, long rates are going to be lower.
For illustrative purposes only. Source: Apollo Chief Economist
For illustrative purposes only. Source: Apollo Chief Economist
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