Roubini Warns of ‘Secular Stagflation’ Era Ahead

Wall Street’s bearish economist and fund manager Nouriel Roubini warned that the era of stable growth and low inflation is ending, giving way to a period of “secular stagflation” that will require investors to rethink traditional portfolio strategies.

Speaking at Bloomberg’s ETFs in Depth conference in New York last week, Roubini said the world faces a combination of supply shocks that will lead to weaker economic growth and persistently higher inflation in the years ahead.

“We're moving now to a regime shift,” Roubini said. “This is a period of time where inflation is going to be higher. There is a risk of debasement of fiat currencies.”

The shift marks the end of what economists call the “great moderation”—a period since the early 1990s characterized by stable growth, low inflation near 2%, and falling bond yields. During this era, Roubini explained, investors profited from both bond income and price appreciation as yields declined.

The New York University professor pointed to several factors driving this shift, including deglobalization, aging populations, geopolitical fragmentation and climate change impacts.

A New Investment Landscape

To navigate this environment, Roubini recently launched the Atlas America Fund (USAF), an ETF designed to provide exposure to assets that can weather stagflation, according to the fund documents. Since its mid-November launch, the fund has so far amassed nearly $6.1 million in assets.

The fund holds a mix of short-duration Treasuries, gold, agricultural commodities and select real estate investments that Roubini believes will perform well in a higher-inflation regime.

“You have to think about an alternative to the traditional defensive assets,” Roubini said, arguing that the standard 60/40 portfolio of stocks and bonds will struggle as both asset classes face headwinds from higher inflation.

While Roubini isn’t predicting hyperinflation, he believes inflation could settle around 5% to 6% in advanced economies, up from the 2% target that defined the “great moderation” period starting in the 1990s.

The economist noted climate change could dramatically impact real estate values, with the fund using “big data” analysis to identify properties likely to benefit from migration patterns driven by environmental shifts.

Roubini also highlighted potential inflation risks from U.S. political developments, saying policies like increased tariffs, immigration restrictions and large deficits could add to price pressures. The Center for Responsible Budget suggests President-elect Donald Trump’s proposed policies could add nearly $8 trillion to public debt over a decade, according to Roubini.

He emphasized that even investors who don't fully share his outlook should consider hedging against these risks. Roubini suggested that investors should diversify away from long-duration Treasuries as defensive assets, even if they believe there is only a 20% to 30% chance of his stagflation scenario playing out.