Inflation Expectations Are Stable, Says Apollo's Slok

Summary

• Long-term inflation expectations remain stable and well-anchored per market and survey measures, despite recent headline inflation pressures.
• Significant divergence between weakening consumer sentiment (across all income groups) and robust actual spending data (air travel, Red Book retail sales, strong hotel demand from Star).
• Fed faces a bifurcated outlook: rising inflation risks (tariffs, oil, strong economy) vs. increasing recession probability (up from 25% to 30% in survey).
• Critical labor market data, especially next Friday's jobs report, is pivotal for Fed policy amid signs of cooling and immigration-related supply constraints.
• Massive investment grade bond supply ($14T, ≈50% of GDP) from Treasury refinancing, budget deficit, and corporate issuance poses technical upside risks to interest rates and credit spreads.
• Current high all-in yields in credit markets (IG and selective HY) may become attractive if oil prices decline and the economy slows, offering "juicy" opportunities.
• Middle East tensions viewed as a short-term disturbance; long-term geopolitical resolution expected to foster stability, lower oil prices, and stronger GCC-US/Europe ties.
• The duration of the energy shock has been insufficient to cause meaningful demand destruction, with consumer behavior still resilient.