Squawk on the Street 2ND Hour: 12/26/25

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Morgan Brennan (0:45)

Good Friday morning. Welcome to Squawk on the Street. I'm Morgan Brennan with Brian Sullivan and Dominic Chu. We are live from post night at the New York Stock Exchange. Carl, Sara, David, all are off this day after Christmas. Coming up, Apollo's Torsten Slock is here. He says the economy is in better shape than many people think. He's going to explain why in just a few moments. And NVIDIA announcing its largest deal ever. Buying assets from private company Grok. Grok with a Q for $20 billion. We've got a top chip analyst to tell us what this deal could mean for investors with shares of NVIDIA of 1.5% right now. And China slapping sanctions on 20 US defense companies, also individuals. We're going to give you insight into what this move says about quietly ramping tensions over Taiwan. Let's start with what we're seeing in the market this Friday morning, though, with some thin trading here and a mixed bag for the major averages with the S&P and Nasdaq, both up fractionally and the Dow down about 15 points right now. But Torsten Schlock, chief economist at Apollo Global Management, is here with us at Post 9 It's great to have you here. Welcome.

Torsten Slocke (1:50)

Thank you.

Morgan Brennan (1:50)

So we just teased it. The economy is in better shape than people are expecting.

Torsten Slocke (1:54)

Why?

Morgan Brennan (1:55)

What are you saying?

Torsten Slocke (1:55)

Well, the list of bullet points of the tailwinds is just getting longer and longer. So we have the one big beautiful bill, which will literally start next week. That's good for consumers. That's good for immediate expensing for companies. We also have lower oil prices. We also have that the dollar has been going down. And finally, we also have that the trade war is now further and further behind us. So the list of reasons why you should be more bullish on growth just keeps on growing as we look into the next several quarters.

Morgan Brennan (2:19)

I've heard the talking points that there's stimulus here in this economy, too, going to 2026, whether it's overt and explicit or not. Your thoughts?

Torsten Slocke (2:27)

Absolutely. The one big beautiful bill helps on two different fronts. It helps with immediate expensing for companies. So now you can do 100% write down of your capital expenditures right away. That's not normally the case. You have to normally do that throughout several years. The second thing that's also helpful is that we also have that the consumers is facing now a lot of tailwinds because we get a lot of refunds in the beginning of this year because now you have a look back to 2025 and that will help also the refunds will generally be 50% bigger in 2026 than what they were in 2025 So both from the consumer side and from the corporate side and the fact that the trade war is getting further and further behind us, it is all very helpful for growth.

Dominic Chu (3:05)

You know, Torsten, a lot of us on Wall Street like to read your daily notes out there. You kind of juxtapose the markets next to what's happening with the economy. Is the market where it is right now justified given what you think is a better economy that's going to develop over 2026? And how exactly does that give it more runway than what it already has right now from a valuation standpoint?

Torsten Slocke (3:28)

Yeah, this is exactly the discussion for 2026 that the growth outlook, as we just talked about, is actually good. But the problem, of course, for the market as usual is that it's so concentrated in AI.

The 10 biggest stocks now make up basically 40% of the index. And we have AI is no longer just a big issue in concentration in equities, it's also because of hyperscaler issuance becoming an issue in public IG. Because the public IG index used to be just financials. But now the public IG index is not only financials, but it's more and more also becoming hyperscalers. So the AI story is just no longer just an equity story. It's also highly concentrated in the credit market. And the consequence of this is that, yes, growth may be good. But if the AI story disappoints in 2026, we could still have good growth. But at the same time, the AI story rolls over. We could have some headwinds, especially to equity markets, but now also more and more to public credit markets.