A former stagflation doomsayer explains why he changed his mind and no longer expects a recession

• Torsten Sløk, one of Wall Street's biggest bears last year, is brushing off the risk of stagflation.
• The Apollo chief economist said he now sees the economy running hot in 2026.
• His updated outlook stems from a handful of tailwinds that should boost growth this year, he said.

An economist who spent much of 2025 warning of a worst-case scenario for the US economy is sounding a bit more upbeat as 2026 kicks off.

Torsten Sløk, the chief economist at Apollo Global Management, said he believed the US is now on track to avoid stagflation, a dire situation where inflation runs hot while economic growth is sluggish.

Meanwhile, he's also slashed his estimated risk of a recession to just 10% — below the 30% odds markets are currently pricing in, he said, speaking to CNBC on Thursday.

"It's getting more and more difficult to be bearish on the economic outlook," Sløk said. "We're moving from that stagflationary outlook that most people had going into this year, to now turn into instead, an overheating outlook."

It's a change of tune for Sløk, who has long warned of a potential recession and was one of the first on Wall Street to sound the stagflation alarm last year. Stagflation is often referred to as one of the worst-case scenarios for the economy, and even harder for policymakers to resolve than a typical recession, as high inflation prevents the Fed from cutting interest rates to stimulate economic activity.

But the situation looks different heading into 2026, thanks to multiple tailwinds that are expected to carry growth higher — taking away the "stag" out of the stagflation dilemma.

Sløk pointed to catalysts like greater certainty around tariffs, a cheaper US dollar, the AI-related investment boom, and stimulus in President Donald Trump's One Big Beautiful Bill. The bill is expected to add nearly 1% in GDP growth in 2026 alone, he estimated.

At the beginning of the year, Sløk wrote that the US economy now appeared to be in "great shape" heading into 2026. He pointed to recent growth in weekly GDP data and same-store retail sales, which reflect strength in the economy and the US consumer in particular.

"It is indeed the case that this stagflationary scenario is beginning to become more the issue that we had in the last few months, and we are beginning to turn more optimistic on the outlook as we look into 2026," he added.

That outlook aligns with other forecasters on Wall Street, who are more optimistic about a "run-it-hot" year ahead for markets. Bank of America, Morgan Stanley, and Goldman Sachs are among the top banks that also think the economy looks like it's on track for a high-growth, high-inflation regime.

Sløk has frequently revised his economic and recession outlook over the past year. In late 2024, he estimated that the US had a 0% chance of recession over the next 12 months, and later, raised his predicted odds of a recession to 90% as tariffs sparked chaos in global markets.