Investors are discounting two major risks to the stock market heading into 2026, said Thorsten Slok, chief economist at Apollo Global Management. Slok stands by his overall bullish case for the new year, but acknowledged that one of the major headwinds is that the market is currently pricing in more interest rate cuts than the Fed has indicated in 2026. Markets are pricing in at least two rate cuts next year, but a grid of forecasts from each member of the U.S. central bank shows only one rate cut. “My expectation is that the Fed won’t cut interest rates significantly because inflation remains very high and at the same time economic momentum is increasing,” Slock told CNBC’s “Squawk on the Street” Friday morning. “For stocks, especially the S&P 500, if interest rates don’t come down, we will continue to see a return to the high cost of capital environment of the past few years.” Throck said new risks to stocks would materialize if the Supreme Court invoked the International Emergency Economic Powers Act to overturn tariffs imposed by President Donald Trump. The president announced many of these retaliatory tariffs in April of this year, on a day he dubbed “Emancipation Day.” Administration officials have argued there are other options to impose tariffs if Trump loses in court. “This could be a very important headline risk for the market, because if all of a sudden the government has to pay back $150 billion, $200 billion to people who have overpaid (tariffs), that means there will be more upward pressure on (treasury) issuance. “And that just reinstates the argument that there could probably be more upward pressure on the long end of the curve, so the curve will become steeper, as we’ve seen in recent months.” But the economist insisted the economy remains in good shape as the new year approaches. “The bulleted list of tailwinds is only going to get longer,” he added.
