Economist Nouriel Rubini expects core inflation to reach 3.5% in the second half of the year in a potential warning of recession.
Economist Nouriel Rubini told CNBC that he expects core inflation in the United States to rise to 3.5% by the end of 2025.
He stated that the second half of the year will witness weaker growth and possibly even a recession, while the Federal Reserve will not cut interest rates before December.
Rubini said that the economic slowdown will look like a "small stagflationary shock" and warned that inflation is still high enough that the Federal Reserve cannot change its course.
The core personal consumption expenditure index, which is the Federal Reserve's preferred measure of inflation, remains steady. Rubini believes it will stay well above the target, keeping the Federal Reserve in a stable position. Slowing growth while inflation remains high is a scenario he has never seen before.
The economist also anticipated a calming of global trade talks, but not in a way that avoids economic damage. He expected a "moderate" outcome in which many countries are subjected to tariffs of 15%.
The Federal Reserve stands idle with the economy slowing and tariffs continuing.
When asked about the potential market implications, Rubini said he does not believe that the United States is heading for another moment like it did on April 2. On that date in 2025, President Donald Trump announced strict tariffs that led to a 20% market drop. Rubini said: "I certainly do not expect anything close to April 2." But the warning remains. He explained that the economic path is narrowing and that the Federal Reserve has limited room to maneuver.
Rubini earned the nickname "Dr. Doom" for his early prediction of the 2008 crash and the economic recession caused by the coronavirus in 2020. Although his accuracy is not perfect, his timing in those predictions made them hard to ignore. He spent years in academic, governmental, and private investment work, and he is currently a portfolio manager at the Atlas America Fund (USAF), an exchange-traded fund launched late last year.
This fund was created to protect investors from risks such as inflation, economic shocks, and climate instability. Despite its small size, with assets not exceeding $17 million so far, it has withstood pressure. Since its launch in November, the U.S. Air Force has achieved gains exceeding 5%, although this figure is less than the S&P 500 index.
When the stock market collapsed after news of tariffs in April, shares of the U.S. Air Force fell by less than 3%, showing some defense against broader disruptions.
Rubini said that the fund's goal is not to seek massive gains. He clarified: "It is not an apocalyptic investment portfolio." The fund is designed for those expecting slow and prolonged instability rather than sudden collapses. It aims to maintain stability, not to achieve spectacular results.
The Atlas America Fund adds gold and reduces its investments in real estate while targeting inflation.
Bonit Agrawal, another manager at the U.S. Air Force, said their focus is on achieving steady returns. He added: "We do not want to achieve massive returns within a month. We prefer slow and steady growth, which we are already seeing."
The exchange-traded fund includes a mix of gold, short-term U.S. government debt, and agricultural commodities. This mix has helped at times, but it has also slowed performance during quieter months like June.
Since its launch, the portfolio has undergone a transformation. The U.S. Air Force has recently increased its investments in cybersecurity and defense technology. It has also purchased short-term inflation-protected securities and reduced its stake in real estate. Betting on gold gave the fund an advantage earlier this year, but it has become a hindrance in recent weeks. However, this reflects a larger idea that Rubini has been promoting.
It is believed that the global economy is gradually moving away from the U.S. dollar, and investors are starting to prepare for that. He said: "We do not expect an economic collapse. But the trend is clear, it is moving in one direction."
According to Rubini, this trend includes rising inflation rates, slowing growth, geopolitical uncertainty, and tightening financial conditions worldwide.
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