Investors are discounting two major risks for the stock market heading into 2026, according to Torsten Slok, the chief economist at Apollo Global Management. For the new year, Slok is standing by an overall bullish thesis but acknowledged that one major headwind is the market currently pricing in more interest rate cuts than the Federal Reserve has indicated will come in 2026. While markets have priced in at least two next year, the U.S. central bank’s grid of individual members’ expectations only indicates one interest rate cut. “My expectation is that the Fed is not going to cut much, because inflation is still very elevated, and at the same time, we have momentum growing in the economy,” Slok said on CNBC’s ” Squawk on the Street ” Friday morning. “For equities — and especially for the S & P 500 — it becomes very important if rates do not go down, then it will continue to bring back this environment we’ve had for the last few years where the cost of capital stays elevated.” Slok said that another risk for stocks will materialize if the Supreme Court strikes down the tariffs President Donald Trump imposed by invoking the International Emergency Economic Powers Act. The president announced many of these retaliatory tariffs in April of this year, on a day he dubbed “liberation day.” Administration officials have insisted that they have other options to implement tariffs if Trump loses in court. “This could be a very important headline risk for markets, because suddenly if the government needs to pay back $150 [billion], $200 billion to those who paid too much in [tariffs], it will mean more upward pressure on [Treasury debt] issuance. And that will just bring back the discussion of maybe more upward pressure on the long end of the yield curve, and therefore a steeper yield curve, just like we’ve seen for the last several months,” Slok said. However, the economist maintained that the economy remains in good shape as the new year approaches. “The list of bullet points of the tailwinds is just getting longer and longer,” he added.
