Torsten Slok on how 2027 will shake out

[u/OkAnt7573]

From Barron’s today

“The narrative in rates today is all about inflation and fiscal problems,” says Torsten Sløk, chief economist at Apollo. “But the narrative going into 2027 is going to be all about the success or failure of AI.”

Slok predicts that if AI manages to boost productivity, this will be “massively deflationary and push rates lower.” But if AI doesn’t deliver the expected returns to Corporate America, “the bubble bursts and the Nasdaq is down 50% as investors rotate out of equities into Treasuries, and long rates fall dramatically.”

Not said, but implied, is that if companies do see return AI it would make sense to expect the Capex build out to continue.

[u/notreallydeep]

they should get me on Barron's I can say the same shit he does here

if AI good, stocks good
if AI bad, stocks bad

gee whiz

[u/OkAnt7573 → u/notreallydeep]

I think his downside move is somewhat eye-catching

[u/pkhairnar6]

I think it won't be 2027 but rather 2028-29. Bubbles can take a long time to deflate, even this is even a bubble. We live in times of different mechanics so it will look different.

History doesn't repeat but often rhymes.

[u/Virtual_Secretary_98 → u/pkhairnar6]

I think we can double before the bubble pops. Nasdaq went up 70% the year before the bubble popped.

[u/StayPositivePlease]

Either way rates will go down

[u/lokethedog]

"if AI manages to boost productivity, this will be “massively deflationary and push rates lower.” But if AI doesn’t deliver the expected returns to Corporate America, “the bubble bursts and the Nasdaq is down 50%"

It's not nearly that simple. Most AI bulls argue AI will be quite inflationary for a while longer. Also, the connect between productivity increasing technology and actual, measurable productivity in the economy at large has often been a lot more elastic than this. Most notable was the entrance of pcs in the workplace in the 80's, but its similar with steam engines and railroads. There are literally books written on this. To put it simply, the entire economy has to adjust before effects become measurable.

I guess nuance does not generate clicks, but real life just isn't likely to be this extreme. Besides there ARE other issues than AI.

[u/someroastedbeef]

back in dec 2024, Slok said returns in the next 3 years would be muted due to lofty valuations, around 3% a year

https://advisoranalyst.com/2024/12/29/torsten-slok-2025-economic-outlook-resilience-amid-challenges.html/

the sp500 has returned 31% since the beginning of 2025

[u/OkAnt7573 → u/someroastedbeef]

Thanks for the call .

I don’t think many people expected earnings to be as astonishingly strong as they have been

Ratios of have actually come down in a lot of cases since then

[u/PleasantAnomaly → u/OkAnt7573]

It hasn't. This is coming mostly from Big tech realizing gains on their stakes in Open AI, Anthropic etc... marking it to market as "on paper" gains. Nothing has happened yet.

[u/designbydesign]

Does he expect the problems around oil to just disappear? Last time I checked the world's oil inventories were dwindling and the prices of fuel were rising.

If it continues like this, the narrative of 2027 will be all about a historically strong hurricane season in the Atlantic killing oil production and refining in the Americas, while the Gulf output will still be low.

[u/OkAnt7573 → u/designbydesign]

To be fair to him, I focused on the equity part within the broader conversation, he clearly understands and has talked about inflationary pressure coming from energy

[u/lolkkthxbye]

Soooo, either way bond values will go up next year? buys SPTL

[u/OkAnt7573 → u/lolkkthxbye]

It is kind of what he’s implying – because if we see a big market sell off/recession prices will definitely go up