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Recently, we hosted an internal capital markets call with Apollo Global Management, a global alternative asset manager with investment strategies across credit, private equity, and real assets. During the discussion, Torsten Slok, Chief Economist at Apollo Global Management, outlined a macroeconomic regime defined by elevated inflation and slowing growth – stagflation.¹

Drawing on market signals, Slok estimated low odds of recession but emphasized that inflation may remain persistent even as GDP softens. He believes this creates a complex landscape for asset allocators, where traditional diversification may no longer be sufficient. Slok discussed three high-conviction areas that can be focused on during stagflation:

1. Prioritize high-quality credit exposure,
2. Consider private market secondaries, and
3. Allocate to resilient thematic investments.¹

Understanding the Stagflation Challenge

Stagflation, a combination of slowing GDP growth and elevated inflation, presents one of the most difficult asset allocation backdrops for ultra-high-net-worth (UHNW) investors. Equity risk premia has compressed, while fixed income yields may fail to provide satisfactory “real” yields.²

Slok noted several macro pressures are converging to increase this risk: U.S. trade tensions, immigration restrictions, resumption of student loan payments, a recent credit rating downgrade, and a weakening dollar that may amplify inflation.¹ ³

In this environment, he believes the next 12 to 18 months might therefore remain volatile. As such, IEQ agrees that a differentiated approach to portfolio construction is required, one that draws on lessons from institutional investing.

Prioritize High-Quality Credit

In periods of weak growth and high inflation, credit quality becomes paramount. We believe investors should prioritize senior secured, first-lien credit instruments that sit higher in the capital structure and offer improved recovery potential.

Private credit, with strong covenants, conservative underwriting, and experienced sponsors, can provide attractive yields while offering downside protection.⁴

Smaller borrowers with limited cash flow visibility are more exposed to credit stress under these conditions. For allocators, staying “up in quality” in both public and private fixed income is an essential defensive posture.¹

Lean into Private Market Secondaries

Private credit and private equity secondaries may present attractive opportunities in the current market environment. As liquidity constraints emerge across LP portfolios, investors may be able to acquire assets at discounts to net asset value.⁴

In our view, secondaries may offer:

• More visibility into existing portfolios.
• A shorter duration to exit than primary commitments.
• The ability to capitalize on forced selling and price dislocations at discounted pricing.

Torsten Slok discussed that this environment, marked by sticky inflation and declining growth, creates divergences in pricing power, favoring selective and value-oriented strategies.¹ We believe secondaries generally align with these characteristics, particularly in credit and late-stage private equity.

Focus on Inflation-Resilient Themes

In a stagflationary backdrop, thematic investments grounded in structural trends may provide a more stable return path. Slok discussed Infrastructure and Energy Transition as one of the key themes duration Stagflation.  He believes these sectors can benefit from long-term cash flow commitments and often have inflation-linked contracts. They are less dependent on consumer behavior or cyclical earnings and may provide broader portfolio diversification.

“Stagflation requires investors to be both more defensive and more selective. We are not relying on traditional playbooks. Instead, our research team is focused on strategies that can preserve real value, extract liquidity premiums, and align with structural tailwinds. Alternative credit, secondaries, and thematic allocations are central to our approach right now.”  — Mike McIntosh, Chief Market Strategist, IEQ Capital

Why It Matters

We believe the traditional “60/40” portfolio structure may face headwinds in stagflation, as both equities and fixed income correlations may rise. This reinforces the importance of differentiated research-backed allocations in private markets with relatively resilient characteristics.

Each of the three strategies presented here, high-quality credit, secondaries, and long-duration themes, provides a differentiated lever to adapt portfolios for real-world economic pressures while maintaining exposure to long-term return drivers.

Conclusion

The current macro environment is defined by uncertainty, policy constraints, and divergent economic signals. For UHNW investors and family offices, this requires a thoughtful reevaluation of both risk and opportunity.

Drawing on insights from our recent capital markets dialogue with Apollo’s Torsten Slok, we believe that private credit, secondaries, and thematic allocations offer the clearest path forward in a stagflationary cycle.

We invite you to speak with our investment team to explore how alternative strategies may align with your portfolio objectives.