The probability of a US recession in 2025 is 0%, according to a top economist. Here's what to worry about instead.

• A US recession in 2025 is unlikely, says Apollo's chief economist Torsten Sløk.
• The economy grew faster than expected in 2024, driven by strong consumer spending.
• Key risks for 2025 include tariffs, Nvidia earnings, and a potential inflation rebound driving rates higher.

The probability of a US recession materializing in 2025 is 0%, according to a Monday note from Torsten Sløk, the chief economist at Apollo.

He released his top 12 risks to watch for global markets in 2025, and a significant economic downturn is not one of them.

The call comes after 2024 delivered yet another year of strong economic gains, building on the gains realized in 2023. US GDP is on track to grow nearly 3% in 2024, and the economy has added about 2 million jobs.

Overall, most economists were taken by surprise. Many expected a slowdown in the economy heading into 2024. Instead, it accelerated.

"The US economy grew much faster than expected this year, supported by solid growth in consumer spending," Jan Hatzius, the top economist at Goldman Sachs, said in a note over the weekend.

So, with no recession on the horizon, what should investors be worried about?

A lot of things, according to Sløk.

At the top of his list are tariffs, which he puts at a 90% probability of being implemented by the incoming Trump administration.

Trump threatened tariffs countless times during his campaign, and he ramped up those threats after winning the election in November, even lobbing them at some of the US's closest allies, Canada and Mexico.

Another top risk for the stock market next year is Nvidia reporting earnings that disappoint investors' "inflated expectations," Sløk said, ascribing a 90% probability of that occurring.

Such an earnings miss would be a big deal for markets, which count Nvidia as the second-largest company in the world by market cap. Investors got a small taste of what that could look like after Nvidia reported its third-quarter results in late November.

While the AI chip company beat earnings estimates, its guidance failed to meet Wall Street's most lofty expectations, resulting in a 10% sell-off in the company's stock price over the next week.

Upside risks Sløk has on his radar, like a further acceleration in the US economy, the unleashing of bullish animal spirits among investors, and a boom in mergers and IPO activity. Such scenarios have between a 75% and 85% chance of occurring, according to Sløk.

But perhaps the biggest downside risk to the stock market in 2025 is Sløk's concern that a rebound in inflation will spark the Federal Reserve to raise interest rates.

That would shock investors, as the market is pricing two interest rate cuts in 2025.

"US inflation accelerates in Q1, driven higher by a strong economy, tariffs, restrictions on immigration, and seasonal factors," Sløk said, assigning a 40% probability to that scenario.

He offered the same 40% probability to the knock-on effects of that scenario, the Fed raising interest rates, and the 10-year US Treasury yield jumping above 5% before the middle of the year.

Whether the economy will be resilient in 2025 remains to be seen, but investors can closely monitor Sløk's list of risks to gauge where the market might be headed next year.