(Bloomberg) — Nouriel Roubini is using Donald Trump's inflation-threatening policy agenda to make a case for an alternative haven trade to Treasuries in a world of high volatility.
The economist, who built his reputation on correctly predicting disaster before the 2008 financial crisis, said the popular 60/40 portfolio is bracing itself for pain once again with Trump's tariff plan — even if it's just a “mild version.” ” – which threatens price stability. .
Roubini is using his fame to market a solution to his long-held warnings, including the risk of a weak dollar and excessive debt load, with the launch of the Atlas America Fund on Wednesday under the ticker USAF.
According to prospectus. It will have an expense ratio of 75 basis points.
The actively managed fund comes just as Wall Street prepares for a new era of bigger wild cards for financial markets, given the president-elect's pledge to break norms on everything from trade policy to independence of the Federal Reserve. All of this risks eroding the Treasury's diversification benefit if stocks fall, recalling the challenges of portfolio protection during the pandemic.
“In the medium term, inflation in the US and advanced economies will gradually move higher,” Roubini said.
“In a world where long rates can go higher, either because of inflation or because the debt and the big deficit mean higher real rates, this is a world in which the defensive asset makes you lose money and sometimes it makes you lose more money than the risky asset. And you have to find alternatives,” he added.
after cratering In the wake of pandemic-fueled inflation, the strategy of putting 60% of assets in stocks and 40% in Treasuries has rebounded somewhat, although the investment style snapped a five-month winning streak in October as the strength of the US economy prompted a breakdown connections.
The new fund will be the first ETF for Atlas Capital Team, a fintech company that Roubini co-founded to help develop investment strategies that hedge against high-risk regimes, including runaway inflation, climate change and civil unrest. .
Roubini, who also runs Roubini Macro Associates, is the latest in a long list of prominent economists and investors to attach their names to ETFs.
“We see this ETF as somewhat of a long-term Treasury alternative,” he said. “You want a defensive aspect. But the traditional hedging aspect in a world of multiple risks is unlikely to be hedging.
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Initial plans for the ETF were conceived during the first Trump administration, with the team capitalizing on growing concerns about the future role of the dollar in the global financial system, as well as plans to invest further in America, said Reza Bundy, Atlas' chief executive. .
The firm is currently in talks with Gulf-based sovereign wealth funds that are evaluating the need to adjust their US Treasury holdings but may wish to maintain their exposure to the US dollar.
“This instrument would be important for years to come given the US debt load and given the major dollarization moves that are happening around the world,” Bundy said.