Apollo’s top economist maps out his signposts for a recession this summer

US stock markets have repaired most of the damage from losses suffered after reciprocal tariffs were unveiled on April 2 in the Rose Garden.

But for the US economy, the damage is yet to come, according to Torsten Slok, chief economist at private equity giant Apollo Global Management. Last week, Slok — who’s typically on the optimistic side when it comes to the US economic outlook — said there was a 90% chance of what he deemed a “Voluntary Trade Reset Recession.”

It’s one thing to have a recession call. It’s quite another to describe why you have one, and how you expect the dominos will fall. Recession arguments that start and end with “well the yield curve is inverted or uninverted!” and “the Leading Economic Index has rolled over” are pretty useless, in that they offer no signposts to monitor changing economic realities.

(If you think the inverted Treasury curve predicted the pandemic, please see me after class.)

Mechanisms and sequencing are important, and Slok has done a tremendous job of that here:

His slide deck on Saturday was the culmination of a series of other notes detailing what he’s tracking (like satellite images of US-China trade by sea) and where he’s getting the data from (like ships scheduled to arrive at the port of Los Angeles).

Slok added that new orders for US manufactured goods, earnings revisions, inbound tourism, and confidence are tanking while inventories and cost pressures surge.

Of note: the two sectors he highlighted as being part of the bleeding edge downward — trucking and retail — are both sources of relative weakness already, particularly the former.

His market call is that, given the nature of this shock, there’s nowhere to hide: he expects bond yields to rise and the S&P 500 to fall.