• Stagflation is the combination of slow growth and rising inflation and trade wars are a "stagflation shock," according to Apollo Global Management. In a new research note coauthored by chief economist Torsten Slok, the firm predicts a sequence of events that could lead to economic catastrophe.

The recent array of tariffs the Trump administration has announced have the potential to trigger a recession by summer 2025, according to a new report from Apollo Global Management.

Based on Apollo’s potential sequence of events, shipping containers from China to the U.S. slowed down after President Trump’s Liberation Day tariff address this month. Allowing for 20-to-40 days travel time, containers shipped to U.S. ports could halt in May. By mid-May, that would portend a rapid slowdown in demand for trucking, which would be followed by less stock in stores for people to purchase. With those signs, that would mean sluggish sales in spring, while subsequent layoffs in retail and trucking could come by late May and early June. Then, in summer 2025, a full recession could take root. 

The Apollo report, co-authored by chief economist Torsten Slok, associate director Rajvi Shah, and associate Shruti Galwankar, paints a bleak economic outlook and is essentially a warning that the U.S. economy is rapidly on pace for a recession due to trade disruptions. 

Warning signs have already appeared even though Trump’s tariff plan was only announced weeks ago. The Apollo report specifically identifies trade wars as a source of stagflation shock because they cause economic activity to lag due to disruptions in supply chain and lower trade volumes. At the same time, the trade standoffs typically raise prices on the cost of imported goods while reducing competition. The dreaded stagflation results from a combination of slower or stagnating growth and increased inflation. There hasn’t been a sustained period of major stagflation in four decades.  

The Apollo research note warns important business sentiment indicators are dropping in short order and the way consumers are responding is cause for serious concern. 

Waning CEO Confidence

Chief Executive’s most recent survey of CEO confidence shows declining optimism, with 62% of top execs now predicting a slowdown or recession in six months. 

CEOs surveyed who predicted a severe recession rose from 9% in March to 14% in April, Chief Executive’s monthly survey found. Furthermore, some 84% of CEOs reported anticipated revenue growth at the start of the year, while only 49% predicted that revenues would grow in 2025 when CEOs were queried again in April. 

Only 9% of CEOs expected a revenue decrease at the start of the year, compared to 44% in the April survey. 

A steep falloff in CEO optimism is coupled with a similar decline in a positive outlook among consumers. 

Plummeting Consumer Sentiment

In a new chart on Sunday, Slok, Apollo’s chief economist, noted that a new record high share of households are only making minimum payments on credit card balances. 

The Federal Reserve Bank of Philadelphia revealed that credit card balances are showing signs of “consumer distress.” The percent of accounts making minimum payments hit a 12-year high based on the Fed’s data, while delinquency metrics were close to or set new highs.

At the same time, people are increasingly worried they will lose their jobs, the Apollo report shows. 

The University of Michigan’s Institute for Social Research’s Survey of Consumers saw its Consumer Sentiment Index drop to 52.1 in April, down from 57 in March. About two thirds of consumers think unemployment will rise this year, which is twice as many as six months ago, according to institute director and economist Joanne Hsu, who was quoted in an update. 

“In an alarming development, consumers are increasingly worried that their income prospects may be worsening as well,” she continued.  

Less than 50% think their own income will increase this year, and about two thirds believe their purchasing power will be whittled down in the coming months, the Michigan survey revealed. 

This story was originally featured on Fortune.com

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• Buying a starter home as a first-time buyer is supposed to be exciting, and a recognition of financial security. But in more U.S. cities, getting a starter home is even more out of reach, given the $1 million barrier to entry in hundreds of cities. 

A new housing report reveals the hurdle to becoming a first-time homebuyer is now even higher in hundreds of U.S. cities. 

Housing platform app Zillow reports there are now 233 locations in the U.S. where a simple “starter home”—a smaller, less-expensive route to owning a larger house—will now run you $1 million or more. The increase represents a dramatic rise from five years ago when there were only 85 cities with million-dollar starter homes. The implications include significantly higher down payments, elevated monthly mortgage payments and more difficulty for low- and middle-income buyers to get on the path to homeownership. 

And it’s not just a California problem, wrote Zillow economic analyst Anushna Prakash. New York, New Jersey, Florida, Massachusetts, Washington, and Texas now boast cities in the million-dollar-starter-home club. This is even more evidence that the housing affordability crisis is “here to stay,” according to new research from Oxford Economics. 

In a briefing this month, the firm reported the national Housing Affordability Index (HAI) was 72.8 in the last quarter of 2024, which means a household that earns the U.S. median income of about $80,000, only had 73% of the money it would need to afford a median-priced home. That means a prospective homebuyer would need a pay hike of about $30,000 to make it work at that home price. 

And there are no quick fixes on the horizon, according to Oxford Economics. Even if home prices stay flat this year, the HAI isn’t projected to approach the affordability threshold until after 2035. Other factors like higher property tax and insurance, low housing inventory, and poor prospects for lower mortgage rates are also major factors. 

According to Federal Reserve Economic Data, the median home price has risen 31% in the past five years. In 2020, the median sales price was $317,000 compared to the current median price of $416,900. Even though that price is down from its late 2022 peak of $442,600, prices are still significantly higher than they were five years ago. 

Builders have also signaled that President Trump’s tariffs won’t do hopeful homebuyers any favors. Tariffs on imported goods are projected to have a cost impact of $10,900 per home, according to a National Association of Home Builders and Wells Fargo Housing Market Index survey. 

D.R. Horton, a $39 billion homebuilder, missed earnings estimates this month and cut its revenue forecast for the year down to $33 to $34.8 billion from $36 billion to $37.5 billion. 

CEO Paul Romanowski told investors the spring home-selling season, usually the busiest period for buyers and sellers, is suppressed because of plunging consumer confidence and affordability issues. 

“This year’s spring selling season started slower than expected, as potential homebuyers have been more cautious due to continued affordability constraints and declining consumer confidence,” Romanowski said. ““We expect our incentive levels to remain elevated and increase further, the extent to which will depend on market conditions and changes in mortgage interest rates.”

This story was originally featured on Fortune.com

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• Minh Phuong Ngoc Vong, 40, of Bowie, Maryland will be sentenced in August after he pleaded guilty to conspiracy to commit wire fraud this month. Vong’s guilty plea is the latest intrigue in what authorities say is a vast fake IT worker scheme that funds North Korea’s illegal nuclear weapons and ballistic missile program. Authorities alleged Vong essentially rented out his U.S. identity to developers based in China who used it to get more than a dozen remote tech jobs, some of which involved contract work for sensitive government agencies. 

A 40-year-old Maryland man is facing decades in prison after he allegedly worked with foreign nationals in China to get remote work IT jobs with at least 13 different U.S. companies between 2021 and 2024. The jobs paid him more than $970,000 in salary for software development tasks that were actually performed by operatives authorities allege are North Korean and working out of a post in Shenyang, China, according to the Department of Justice. 

The China-based developers used the company IT jobs, some of which involved contracting out software services to U.S. government agencies like the Federal Aviation Administration, to get access to highly sensitive government systems that they logged into from overseas, authorities said. According to the Department of Justice, the Maryland man’s scheme is part of a vast fraud operation in which trained North Korean nationals work with American facilitators to fraudulently obtain remote-work IT jobs under various identities, do the work from Russia or China, and then illegally remit their salaries to Kim Jong Un, authoritarian leader of the Democratic People’s Republic of Korea (DPRK). 

There have been dozens of indictments in the conspiracy, including Americans who have pleaded guilty to hosting computer farms, where they keep dozens of company-issued laptops in their homes for a fee so that it appears the work is being done in the U.S. The UN has estimated the scheme generates revenues between $250 million and $600 million each year and funds North Korea’s illegal nuclear weapons program. The FBI, State Department, and  Department of Justice say thousands of DPRK IT workers have been hired for positions at hundreds of Fortune 500 companies in recent years. 

In the case involving Maryland man Minh Phuong Ngoc Vong, the DOJ claims he worked in league with developers in China, including one who called himself “William James.” Court records show authorities believed James and other John Does in the scheme are natives of North Korea. Vong allegedly told an FBI agent “William” approached him through a cell phone video game app and told Vong he could “legally” make money by getting development jobs and then giving William his computer access credentials. 

According to the DOJ and court documents, Vong allegedly let James and the other unnamed conspirators draw up a fraudulent resume for him saying he had a degree from the University of Hawaii, 16 years of experience as a software developer, and had previously maintained a secret-level security clearance. The DOJ said Vong, who worked in a nail and spa salon, had neither a degree nor did he have experience in development. 

At one of the 13 jobs, someone who identified himself as Vong allegedly joined an online interview with a senior software developer who recommended he get the job and took a screenshot of him during the meeting.  The CEO of the Virginia-based company later hired him after a successful final interview in which Vong allegedly showed his Maryland driver’s license and U.S. passport to confirm his identity, and the company screenshotted Vong a second time holding up the documents. (Court records show authorities believe these screen grabs are of two different people—one who is allegedly a North Korean IT worker posing as Vong, and another who is the real Vong from Maryland holding his license and passport.)

The company set Vong to work on an FAA contract that involved an application monitoring aviation assets in flight in the U.S, according to court records. The software is used by government agencies such as the Department of Defense, Department of Homeland Security, and Secret Service. The Virginia company shipped Vong a MacBook Pro laptop with administrative rights to download software and the FAA let Vong have a Personal Identity Verification card to get him into government facilities and systems, court records show. Vong allegedly installed remote access software on the company device so that James and his cohort could use it from China. 

Between March and July in 2023, the Virginia company paid Vong more than $28,000 while the work was performed by James and other unknown people, the DOJ said. During his time there, someone known as Vong attended Zoom meetings for work and spoke to his team about his task list at a daily meeting. As part of his guilty plea, Vong admitted the Virginia job was only one among 13 different companies that hired him between 2021 and 2024. Several did contract work for the U.S. government, in addition to the FAA. Vong got fired by the Virginia company after it submitted his information to the Defense Counterintelligence and Security Agency for a secret clearance and found out he might have another job. 

After he was fired, the CEO showed Vong’s picture to the senior developer who initially recommended him. The developer told the CEO that the individual he called "Vong" in the photo wasn’t the same "Vong" he had initially interviewed and screenshotted. He also wasn't the person who participated in daily virtual meetings and did work.

Vong pleaded guilty to conspiracy to commit wire fraud and is facing 20 years in prison. Reached by phone, Vong declined to comment. 

Michael "Barni" Barnhart, principal insider risk investigator at Dtex Systems, told Fortune in a statement the continued efforts by U.S. law enforcement to expose and disrupt the North Korean IT worker operations and the facilitators who enable them are positive advancements.

"These indictments are another critical step in thwarting adversarial operations," said Barnhart in the statement. Still, Barnhart said his group has directly observed IT workers trying to get other highly sensitive jobs, including positions with clearance within the U.S. government and third-party contractors for federal agencies.

Furthermore, in a report published this month, Google’s Threat Intelligence Group revealed the scheme is expanding, and one DPRK worker late last year operated at least 12 personas across Europe and the U.S., and was looking for more jobs in European defense and with government contractors. Other investigations found fake IT worker identities seeking jobs in Germany and Portugal, according to the latest report.  

“Even if these actors are primarily financially motivated, the risk they pose to critical infrastructure is enormous,” John Hultquist, chief analyst at Google’s Threat Intelligence Group, told Fortune. “This scheme has become so widespread that targeting of these organizations is almost inevitable. Given their connection to the intelligence services, that kind of access could be a nightmare.”

The FBI’s Baltimore office is investigating the case.

This story was originally featured on Fortune.com

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• CEOs are waiting to see how the Federal Trade Commission under President Trump will differ from the Biden administration, and thus far, the lighter-touch enforcement that businesses hoped for hasn’t materialized. The FTC is currently suing Meta in an antitrust case, which could see the social-media giant broken up. Meanwhile, Chair Andrew Ferguson has said the agency will stick to the FTC’s more stringent merger framework established under Biden, emphasizing the need for stability.  

Former Federal Trade Commissioner Christine Wilson is airing out more of her views on former Commission Chair Lina Khan. In remarks last week, Wilson said she believes Khan took an interventionist approach, using procedural mechanisms that potentially slowed or blocked more mergers. It was the latest salvo from Wilson after she resigned from the FTC in 2023, claiming Khan “scorned and sidelined” career FTC staffers and presided over a decline in enforcement actions. 

“Chair Khan really did believe that all mergers were bad,” said Wilson, now a partner at law firm Freshfields. “She used what I call just procedural shenanigans—basically using every procedural lever available to chill M&A activity.”

Wilson interviewed sitting FTC Commissioner Melissa Holyoak at the Berkeley Spring Forum on M&A and the Boardroom in San Francisco last week. Holyoak was asked how the FTC under the current administration would differ from the last. One of the FTC’s roles, along with the Department of Justice, is to review proposed acquisitions and mergers that impact U.S. commerce and are valued at more than $101 million for antitrust issues. President Trump’s administration was predicted to be more business-friendly in the area of dealmaking and M&A, but CEOs and startups are still waiting to see how the newly organized FTC moves in the months ahead and what it means for growth, acquisitions, and the overall appetite for deals.  

Wilson asked Holyoak whether there were practices the previously organized FTC engaged in that were “particularly egregious,” and if businesses could “trust that the Trump administration was going to play straight and look at cases on the merits.” 

Holyoak took a different tone in her response and identified a “lack of communication” and a lack of transparency between the FTC and companies, but said it was a priority of hers to bring that back into the merger-review process. 

Khan did not return a request for comment but a former FTC official who served under Khan said, "Commissioner Wilson's accusation is shockingly out of touch with reality."

The Wall Street Journal reported that dealmakers are still getting used to the new FTC and are awaiting clearer signs about FTC Chair Andrew Ferguson’s approach. He clarified in a February memo that the FTC and DOJ’s joint 2023 merger guidelines were indeed the framework that would guide the agency’s merger-review analysis, dashing hopes the FTC might loosen the reins from the Biden-era framework. Ferguson told an audience packed with executives this month he doesn’t think corporate America should revert to “open season” for M&A, the WSJ reported. 

Meanwhile, the DOJ’s antitrust division leader, Gail Slater, has also raised concerns about the deal-making environment, the Financial Times reported. Slater has previously expressed concerns about too much concentration in certain industries and has said enforcement should be based on direct financial impact on Americans. 

Furthermore, CEOs and executives remain worried Trump could steer antitrust cases in ways that create greater uncertainty, pouring more cold water on the M&A operating environment. It stands in contrast to former chair Lina Khan’s FTC, the FT reported, which was more predictable.  

February marked the first time in more than two years that no deal worth more than $10 billion had been announced globally. This reversed in March with Google’s $32 billion deal to buy Wiz, but April so far has been quieter. 

Year to date, the number of deals is down 19%, according to the WSJ. 

This story was originally featured on Fortune.com

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• Tesla CEO Elon Musk announced on Tuesday he would turn his attention back to the electric vehicle maker but said he would likely still work in government as long as President Trump would have him. However, as a special government employee, Musk was only supposed to spend 130 days per year on government work. With about 36 weeks left in the year, Musk’s total time in the SGE role could potentially span 126 to 162 days. 

Tesla investors have been begging Elon Musk to turn his focus back to the electric vehicle maker and execute on his lofty plans for self-driving fleets of taxis, humanoid robots, and unsupervised full-self driving technology. During an earnings call with analysts on Tuesday, Musk finally said he would oblige, and vowed to spend less time on the Department of Government Efficiency (DOGE) and more time at Tesla, where he is the CEO. 

“Probably starting next month, in May, my time allocation at DOGE will drop significantly,” Musk said. “I'll have to continue doing it. I think we have the remainder of the President's term just to make sure that the waste and fraud that we stopped does not come roaring back, which it’ll do if it has the chance.”

Musk said he would spend “a day or two per week on government matters for as long as the President would like me to do so, as long as it is useful.” 

“But starting next month, I will be allocating far more of my time to Tesla now that the major work of establishing the Department of Government Efficiency is done,” Musk declared.

The Tesla CEO did not address the time limit on his work as a special government employee (SGE), however, which limits him to serving no more than 130 days within a 365-day period. But he will have to be judicious about how he allocates his Trump days in order to stay within the rules. With roughly 36 weeks left in the year, spending one or two days per week could potentially see Musk spend a total of 126 days to 162 days, given that he’s already spent about 90 days as an SGE thus far. 

That designation allows Musk to serve in outside roles and on boards without making the public disclosures about his finances that would be required of a typical government worker. In addition to Tesla, Musk is also closely involved with a collection of privately-held companies he has founded including SpaceX, X, the Boring Company, Neuralink, and xAI. Typically CEOs and board members of companies resign their roles in the private sector before taking on assignments in government positions. 

The White House did not immediately respond to a request for comment.

Despite the lack of clarity over Musk’s time assisting Trump, Tesla investors took his decision as a balm on the troubled automaker. Following Musk’s remarks—which generated news headlines around the country—after-hours trading in Tesla stock shot up more than 5%.

The bump came even as Tesla announced another disappointing quarter for investors, with tumbling operating income, net income, and operating margins.  Revenues were down 9% to $19 billion although energy revenues were up 67% to $2.73 billion. Tesla also had a cash position of about $37 billion, up 38% year over year.

Tesla’s concerned stockholders

With hordes of retail shareholders in its stock, Tesla’s investor relations team takes questions in advance of its quarterly calls. Among the 161 questions submitted about Elon Musk himself, the top three largest retail shareholders asked about his role in government and what Tesla was doing to mitigate harm to the company. 

“Boycotts, protests, vandalism, negative headlines, and a stock slide have been sparked by Elon Musk’s participation in changes to U.S. gov’t services & employment,” wrote a stockholder with about 88,000 shares. “Is the Tesla board discussing whether their CEO should focus fully on Tesla and leave gov’t to elected politicians?”

Another investor with 365,000 shares asked, “How is the company planning to deal with the impact of Elon’s partnership with the current administration?”

The third question with the most shares represented, also the third most-upvoted by other investors, asked: “With Elon's involvement with the federal government the Tesla brand has been under attack, more so than usual. What steps are the company taking to alleviate these attacks and educate the public about the benefits of Tesla?”

Read more about Tesla's Q1 earnings:

Elon Musk’s robotaxi could be Tesla’s final all-new EV: ‘The reality is, in the future, most people are not going to buy cars’

Elon Musk says first Tesla robotaxis in Austin will be a fleet of 10 to 20 Model Ys but gives few details: ‘You can just see for yourself in two months’

Elon Musk’s robotaxi could be its final all-new EV: ‘The reality is in the future most people are not going to buy cars’

This story was originally featured on Fortune.com

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