Apollo Global Management's Marc Rowan Talks Tariffs and Trade
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Bloomberg Audio Studios. Podcasts, radio, news. And we welcome our TV and radio audiences. I'm Shinali Basick at the Milken Institute Global Conference in Beverly Hills. And joining me now, Apollos

Apollo CEO and co-founder Mark Rowan. And what a time to be speaking with you. Just a few things going on. A few things going on, but a lot today alone. We have the Treasury Secretary speaking at 8 o'clock here Pacific time. We had Elon Musk speaking last night and the President of the United States changing his tune on tariffs. Where do you think the end game is given that tariff

The tariff talk is taking up so much of the discussion here. Look, what the administration wants to do, in my opinion, is not wrong. We are the freest trading country in the world and have been since the end of World War II. It is not clear to me that we have to be or that we should allow allies and strategic competitors to inhibit our access to their markets.

We can take issue with how it's being done and the uncertainty it's creating, but the president and the administration start with a really strong hand. Low unemployment, good job growth, massive capital investment over the last four years and continuing in the U.S. So now is actually a good time, but we have uncertainty. And in the face of uncertainty, people do not make new investments, they do not hire, they do not make moves. We likely will cause two quarters of negative growth.

if we in fact don't resolve the uncertainty. So until we have resolution of what the rules of the game are, it's going to be slow. A lot of people talk about the potential for a recession, but little are people talking about the severity

could exist in the potential for a recession. Look, now we're talking about forecasts and projections. In our firm, when we were raising rates, 300 and 400 basis points, we talked about a non-recession recession, which is a correction in asset prices but not necessarily in labor. We kind of see the same thing happening again. It's not to say we won't have some fallout and some adjustment, but we're starting from a place of 4% unemployment,

Good job growth. We are building infrastructure, we're building semiconductor plants, we're absorbing massive amounts of foreign direct investment. Like it or not, we're building Inflation Reduction Act factories. And now the president is channeling capital from around the world to come back here. Some days I wake up and worry about capital. Most days I wake up and worry about where will we get all the people.

to do this. Now you mentioned that you agree with what he's doing but maybe not how in all the ways. To the extent that you think that this should be done differently, to the extent that you don't like the method of the change,

What needs to change? Look, this is now the toughest job in the world is now Scott Besant. As I said, we want this administration to succeed. Every American should want this administration to succeed. So how I would do it is not really relevant. I will point out the following. U.S. and Mexico together should be the driving economic force in the world for the next 50 years.

We have not been able to get there despite two or three rounds of massive free trade agreements. The issues that separate us from Mexico are not existential to Mexico. As one leading Mexican industrialist said to me, "If it takes tariffs to make Mexico great again, so be it." Inside of Mexico, there's a need for change. Imagine coming to the world with Mexico and Canada resolved first,

and then taking people piece by piece or country by country. We would just be in a much stronger position to do what we need to do to reset the terms of trade. But in the meantime, you had mentioned it as well that people are on hold, businesses are on hold, a lot of businesses are at risk of layoffs if this continues. How long can this uncertainty continue without causing much greater damage? Look, we're going to have uncertainty. We have uncertainty already.

Until we see critical mass of trading partners agree to ongoing new economic relationships, we're going to have uncertainty. But that could take years, couldn't it? That could take years. I don't think the administration will allow it to take years. Clearly, what they are trying to do is to create positive momentum by getting country after country to agree to new terms of trade.

If that happens, this could be very short-lived. If it doesn't happen, uncertainty could continue for a period of time. But we also have to take into account short-term and long-term. Uncertainty will eventually resolve itself. Longer term, the way we've done this, we have done damage to the U.S. brand, the brand for stability, for predictability, for regularity.

that will eventually have some cost to us. Right now it does not. What I've said is I see us moving from what was hyper exceptionalism to

to merely exceptional, because I don't think there are good alternatives to the U.S. today, but that can change over time. Let's talk more about the U.S. brand for a moment, because you have businesses across the globe, from Europe to Japan. Now, what are they saying? What are your investors in different regions saying about their willingness to put money into U.S. capital markets? Your deputy, John Zito, had written a letter to investors talking about the risks to the U.S. brand as well.

the risk to U.S. capital markets. Are you seeing any of that? We will see it, but we're not seeing it yet. But think about that. The U.S. is still 60 plus percent of all the capital raised in the world. We are in the absolute best position from a capital formation point of view. No one has what we have. That does not mean they will not want it over time. Everything that we want to do here,

build infrastructure, next generation manufacturing, add energy, defense, next generation data and power. Europe wants to do exactly the same thing but lacks any real source of long-term capital. In the Drahi report, Mario Drahi lays out

what Europe needs to do to be competitive. And most of the report is focused on revisions to capital formation. Will Europe do that? I don't know. I think what John Zito points out in his letter, that they have the best chance relative to the U.S. to create this kind of positive momentum. So then there's the question of what you do in this uncertainty. Now,

Recently, you told investors just last week that you're willing to sit things out, you're willing to reduce leverage. However, you believe that you are one of the largest active buyers of assets post-Liberation Day. That is $25 billion in April alone. Alone. What are you buying? So let's start with, I talk to investors and I ask three questions. Are prices low?

No, I do not believe prices are low. They are lower, but we're still talking about an average PE as a reference in the mid-20s versus 16 over time. Are rates likely to plummet? I don't think so, and our firm does not think so. Most of what we're doing is inflationary. Third, do we have heightened geopolitical risk? Listen to our conversation. There's heightened geopolitical risk. What do you want to do if those three things are true? I think you want to reduce risk.

In credit, we're going up the capital structure, senior secured, investment grade, trying to reduce risk. We're not trying to make money by being a good credit selector in a volatile market. And in the equity market, moving from things that are growthy and things that are ventury to things that are cash flow based and more hybrid in their outcomes.

So what did we do in April? We bought mostly investment grade. Ironically, mostly in the public markets. I think we will see this interesting dynamic take place. We have a perception that what's public is safe and what's private is risky. But what if we're wrong? What if public is safe and risky and private is safe and risky? In private, most people are set up to hold things for the long term.

In public, we have this belief that we can sell something every day. In equities, that is true. In fixed income, it is not true in the best of times. It is certainly not true under stress. It takes five days today to sell an investment-grade corporate bond. We should expect in every risk-off moment

public credit to trade poorly. So what about the future? If you think that we saw some moments of market, let's say seizure, right? You did see full moments where there were weeks at a time where the new issuance market was closed. Do you worry about liquidity into the year given the way things are going? And do you think that the Fed would need to step in?

So I worry about liquidity, but in a different way than you're asking. I think there's plenty of money in the world. If we use that as a proxy for liquidity, could we have tough treasury auctions around political events? Absolutely. I don't think that is actually fundamental.

What I worry about and the biggest buildup of risk I see in the world is we are brought up with an expectation of being able to trade everything every day. Everything is daily liquid. Your ETFs, your open-ended mutual funds and so on and so on. In the equity markets, it's actually liquid. In the credit markets, it's not actually liquid. We just don't know that yet. We've seen it in the UK in something called LDI where people thought they could sell something and it turned out they couldn't.

We're going to see that. We saw it in the run-up to COVID. We saw a little blip in the market over the past few weeks, which is why we ended up buying. But again, this notion that everything that's daily liquid is somehow safe is just a notion. It's just not true. So I want to go back to something you were saying before, that this environment that we're facing could be very inflationary, right? If you believe that we are facing an inflationary environment, what do you make of privatization?

President Trump's bid to try to get the Fed to lower interest rates at this juncture. Do you think it's possible? Good news. I don't have that job. It's not even in the realm of possibility for me to do. Look, we are moving things from low-cost labor countries to higher-cost labor countries, particularly to the U.S. There are strategic reasons to want to do that, but we can't deny that that is inflationary in some ways.

We are not relying on a global trading system to the extent we have previously. That is inflationary in some ways. We have a tight labor supply, 4% unemployment. We have good job numbers. We have no legal or legal immigration. That is inflationary in some ways. Yes, are there countervailing measures? Energy prices are lower at the moment. Technology will eventually introduce savings. The key word being eventually.

At the moment, the policies we're following have a risk of being more inflationary than otherwise, which generally will lead to higher long-term rates, even if short-term rates come down.

Mark, we thank you. Enough macro. I know. It's the macro world that we're living in, and we will be watching you closely because we are waiting for that fat pitch investment. Mark Rowan of Apollo, of course, joining us here at the Milken Institute. Hiscox Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance constantly.

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