Roubini Launches New ETF to Hedge Against Trump's Inflationary Policies

Economist Nouriel Roubini, known for his accurate prediction of the 2008 financial crisis, has launched a new exchange-traded fund (ETF) designed to protect investors from the potential inflationary consequences of Donald Trump's economic policies, reports Bloomberg.

Roubini argues that Trump's planned tax cuts and tariffs threaten price stability, posing a risk to the popular 60/40 investment portfolio. The new ETF, called the Atlas America Fund (USAF), aims to offer an alternative haven trade to US Treasuries, which are seen as vulnerable in a high-volatility environment.

"Over the medium term, inflation in the US and advanced economies are going to go gradually higher," Roubini stated. "In a world where long rates may go higher, either because of inflation or because large debt and deficit imply higher real rates, that’s a world in which the defensive asset makes you lose money and sometimes makes you lose money more than the risky asset. And you have to find alternatives."

The USAF ETF will actively manage investments across a diversified range of assets, including climate-change resilient real estate investment trusts, inflation-protected US Treasuries, municipal securities, corporate bonds, and gold trusts. The fund will have an expense ratio of 75 basis points.

The launch of the USAF comes as Wall Street prepares for increased market uncertainty under Trump's presidency, given his pledges to challenge established norms on trade policy and Federal Reserve independence. These actions risk undermining the traditional diversification benefits of Treasuries, particularly if stocks decline.

The 60/40 investment strategy, which allocates 60% of assets to equities and 40% to Treasuries, has experienced a recent resurgence after struggling during the pandemic's inflationary period. However, this strategy ended a five-month winning streak in October as a strong US economy fueled a bond market selloff.

Roubini co-founded Atlas Capital Team, the fintech company behind the ETF, to develop investment strategies that mitigate risks associated with high-risk regimes. The firm is currently in talks with Gulf-based sovereign wealth funds considering adjustments to their US Treasury holdings while maintaining US dollar exposure.

"We see this ETF as somewhat of an alternative long duration Treasuries," Roubini explained. "You want a defensive aspect. But the traditional defensive aspect in a world of a variety of risks is not likely to be defensive."

The initial concept for the ETF was developed during Trump's first term, reflecting concerns about the future of the dollar and a focus on boosting domestic investment. The firm is currently discussing the ETF with Gulf sovereign wealth funds evaluating their US Treasury holdings and the need to maintain US dollar exposure.