Episode summary
The 35% Recession Warning Markets Are Ignoring | Prof G Markets
Prof G Markets
· · 1 hr 3 min · Hosts: Ed Elson, Scott Galloway · Guests: Ed Yardeni
Summary
Ed Yardeni argued that the war has raised recession odds because oil has stayed around $100 a barrel, gasoline and fertilizer costs are rising, and the Fed is now less likely to cut rates. He said the economy has been remarkably resilient so far, but the combination of an oil shock, a weak labor market, and slowing growth could create a stagflationary setup similar to the 1970s.
He was more cautious about the private credit market than he has been in the past. Yardeni said retail money flowing into illiquid private credit funds creates the risk of a broader credit crunch if investors try to exit at once, even if the large firms like KKR, Apollo, and TPG do not look fundamentally strained. He also said markets are underpricing how geopolitical shocks could interact with financial vulnerabilities.
On broader asset allocation, Yardeni said the U.S. still looks relatively attractive, even though 2025 favored Europe, Japan, and emerging markets. He said bond yields around 4% to 4.5% look normal to him, that AI fears are overblown for the labor market, and that the biggest structural risk remains a debt-driven credit event rather than a headline war alone. He ended by saying the world keeps getting wealthier despite politicians and crises, which is why he remains constructive on long-term equities and diversification.
Key takeaways
- Yardeni raised his recession probability from 20% to 35% because oil near $100 a barrel could push inflation higher and delay Fed cuts.
- He said private credit is becoming riskier because retail investors are now a bigger source of funding in vehicles that are not very liquid.
- He thinks AI is overblown as a job-destruction story and expects firms to use it mainly to raise productivity, not slash payrolls.
- He said U.S. bond yields in the 4% to 4.5% range look normal and that the bond market is unusually calm rather than broken.
- He remains constructive on long-term U.S. and global equities, but sees geopolitical shocks and debt-related credit stress as the main things that could change the outlook.
Notable quotes
“We raised our odds of a recession from 20% to 35% a few days after the war started when we concluded it might be longer than widely expected”
“we have a huge capital market. They're distressed asset funds that are always looking to buy things on the cheap”
“the bond market has been remarkably quiet”
How the episode opens
Today's number, $48 million. Kelsey's trading volume on Oscars' categories hit 48.4 million this year, up 39% from last year and 95% from 2024. Ed, I don't know if you saw the award for participation trophy. — You got to you have to have a punchline.
Well, Ed, you had to be there. All right, never mind. I got something better. — No, no, maybe that works. But but what happened to the timing? — That's the problem when I try to go dad. All right. this Did you hear about the new category for suicide bomber?
No. — Unfortunately, he couldn't be with us tonight. — Ed, uh, I don't know if you heard. Um, anyways, any questions you want to ask me about anything I did this weekend? Like anything you'd like to know about Ed? Anything on your mind? Anything at the tip of the tip of your prefrontal of your still evolving prefrontal cortex?
Yes. Now that you mention it, how was the Vanity Fair Oscars after party in LA? Scott, — Ed, Ed, Ed, Ed, I don't like to talk about my personal life, I just this once, we'll turn this back to me. Oh my god, could I be more fabulous? I mean, seriously, I was in Brunell Coochinelli. I sat next to the I think her name is Allison Brie. She's a woman. She was Trudy on Mad Men.
Oh, yeah. Yeah. Yeah. — And she was in Glow. And she's in this new movie. She couldn't have been more lovely, more beautiful. And then I sat next to the woman on my left was Jessica Williams, a woman in the she's in the series Shrink, also super smart, intelligent, interesting. And uh two seats away from me with Sam Alman.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- recession odds
- private credit risk
- bond market
- u.s. debt
- labor force slowdown
Companies and tickers mentioned
- Yardeni Research
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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