Torsten Slok’s Mid-Year Outlook: Three Forces Driving Markets

**Brad Young** (0:02)
Hello, and welcome to another episode of The View From Apollo podcast. I'm Brad Young, head of client content here at Apollo.
As we head into the second half of 2026, investors are navigating a market that's been shaped by what's being called an AI super cycle, geopolitical events, rising inflation, and questions around interest rates. To help us make sense of it all, and what it means for investors, I'm joined once again by Apollo chief economist, Torsten Slok, who is here to discuss his mid-year outlook. Torsten, great to have you with us, as always. Welcome.

**Torsten Slok** (0:32)
Thanks for having me, Brad.

**Brad Young** (0:34)
I think we should probably start from the beginning. It's been three months since we had you here in the studio. How are you feeling? What's the data telling you about where the macroeconomic picture is right now?

**Torsten Slok** (0:42)
Well, what's been surprising more recently is that despite some of the headwinds coming from the Middle East and oil prices going up, we still continue to get pretty good data. The employment report for May was pretty strong. We also have consumer spending has continued to be strong. We also have business spending has been very strong. So overall, the economy continues to be quite resilient and actually do quite well.

**Brad Young** (1:02)
And so if you were to break that down and do a couple of key factors on whether that continues or not into the second half of 2026, what do you point out as the main drivers for the rest of the year?

**Torsten Slok** (1:12)
Well, there are three very important reasons why things are still holding up quite well. Number one, we are having an AI boom, and the AI boom is very helpful. The data center build out is helpful. The energy build out is very helpful for growth. And we also, at the same time, have the industry of renaissance, which is also helpful for growth. And we also, third and finally, also have the One Big Build for Bill, which is also helpful for growth. So we're having a number of factors that are quite unique. The AI boom is quite unique. And in particular, the One Big Build for Bill was a political decision, of course, to support the economy in 2026 It's also helpful. So overall, those tailwinds, they are providing a quite significant fuel to growth, and that's why we're quite optimistic for the rest of the year.

**Brad Young** (1:50)
And I'm sure we'll get to some of the risks for the outlook moving forward. Let's talk about those drivers, those tailwinds. Let's start with AI spending. You've been making the point that AI is much bigger now than a stock market story. What makes you say that?

**Torsten Slok** (2:02)
Yeah, so the key issue is that AI, of course, is a truly revolutionary technology that is making a significant difference in all our lives, almost no matter who you are and where in the world you are, because we're seeing significant improvements when it comes from last language models. We're seeing agents and agentic AI really take off in a very significant way.
And as a result of that, a lot of compute is needed. And when compute is needed, that means that more data centers are needed. And when data centers are needed, that means that energy for the data centers are needed. So there's a very significant tailwind, simply because a lot of computing power is needed for businesses, for households. And that's the key source of growth for the economy, namely that we are seeing a data center build out and an associated energy build out. That is just unlike what we have ever seen before. So a lot of dimensions around both the supply of computing data centers, but also in terms of the demand and the debate more recently has been, what is demand in terms of token demand? And token demand, more companies are now beginning to organize their token demand in a different way, because tokens have become more expensive. So there's a lot of different dimensions to your question in terms of what are the tailwinds and will those tailwinds continue? But at the end of the day, it ultimately ends up being a discussion around what is demand for compute going to look like, what is the price of compute going to look like, and what is the supply of compute going to look like.

**Brad Young** (3:21)
It's not going to go away.

**Torsten Slok** (3:22)
It will definitely not go away. And for you and me and everyone else who's listening, we will certainly have large language models for the rest of our lives. This is a technology that is truly revolutionary. And that is something that of course becomes very important because it also is an issue around not so much whether this is going to end with a growth rate of 3.4 or 3.7, but more something that also is going to have a very significant impact in how we all work and how we live and exactly on the broader economy and all our lives.