There are two risks the market isn’t pricing in heading into the new year, according to Apollo’s Torsten Slok
Apollo chief economist Torsten Slok said that the Supreme Court potentially striking down President Trump's tariffs could be a big headline risk for markets.
TL;DR
- Investors may be overlooking two major risks for the stock market heading into 2026.
- Markets have priced in more interest rate cuts than the Federal Reserve is expected to deliver in 2026.
- The Fed is likely to cut rates minimally due to elevated inflation and growing economic momentum.
- If rates remain high, it will continue the environment of elevated capital costs.
- A Supreme Court ruling against President Trump's tariffs could lead to significant government reimbursement costs.
- This reimbursement could increase Treasury debt issuance and put upward pressure on long-term yields.
- Despite these risks, the economy is viewed as being in good shape approaching the new year.