According to the Zhitong Finance APP, &#34;Dr. Doom&#34; Nouriel Roubini has issued a new warning to Wall Street: traders should reduce their bets on the Federal Reserve increasing interest rate cuts to mitigate the impact of Trump's tariff policies. This time, the economist, who gained fame for correctly predicting the 2008 financial crisis, expects that after the gradual de-escalation of tariff-related policy struggles, the Federal Reserve will maintain stable interest rates for the remainder of the year, while the U.S. economy will avoid recession.
Amid concerns that punitive tariffs will exacerbate the global economic downturn, the U.S. stock market has faced a $5 trillion sell-off for three consecutive days. Roubini predicts that Trump will be the first to yield to market pressure, even though Trump recently supported tariffs as a remedy, while the Federal Reserve remains committed to its mission of combating inflation. Roubini believes that, coupled with the relative resilience shown by the credit markets during recent global turmoil, the Federal Reserve has reason to remain cautious in its policy.
In a telephone interview, Roubini stated, &#34;Of course, there is a game of chicken between Trump's position and Federal Reserve Chairman Powell's position. But I would say that Powell's put option strike price will be lower than Trump's put option strike price, which means Powell will wait until Trump yields.&#34;
Powell indicated last week that the impact of new tariffs on the economy could be far greater than expected, leading to a slowdown in economic growth and rising inflation. This week, traders expect the Federal Reserve to cut interest rates 3 to 5 times by 25 basis points this year—some on Wall Street are even considering an emergency rate cut before the next meeting.
Nevertheless, Powell hinted last Friday that now is not the time to execute the &#34;Federal Reserve put option,&#34; even as American household wealth evaporates and economic activity faces real risks.
The &#34;Federal Reserve put option&#34; is Wall Street's term for the Fed's actions to support a plummeting stock market. This term originally emerged in the form of the &#34;Greenspan Put&#34; after the famous &#34;Black Monday&#34; stock market crash in October 1987, when former Fed Chairman Alan Greenspan cut interest rates and injected liquidity. Successive Fed leaders have taken other significant measures to respond to the ensuing crises, which helped curb market losses and even reversed market trends.
No Federal Reserve officials would admit that the &#34;Federal Reserve put option&#34; is part of their policy toolbox, but Wall Street has had a natural confidence in its existence for nearly 40 years. Currently, unless the U.S. economy enters a recession, the Federal Reserve will find it difficult to significantly cut interest rates to rescue the market.
On Tuesday, after the tariff increases exceeded expectations, trade negotiations are expected to reach a conclusion, while trade turbulence continues. U.S. Treasury bonds fell after experiencing the craziest day for bond traders since the peak of the pandemic in March 2020, while the U.S. stock market surged at the fastest pace since 2022 before retreating. The VIX index—known on Wall Street as the fear gauge—soared above 60 and is currently around 55. Investors have been concerned that amidst all the volatility, there could be a segment of the market collapse
Roubini's optimistic economic outlook stands in stark contrast to other market observers. Former U.S. Treasury Secretary Summers predicts that a recession could lead to 2 million Americans losing their jobs, and some Wall Street economists share his pessimistic stance. S&amp;P Global has raised the probability of a U.S. recession from 25% in March to the current 30% to 35%. HSBC has increased the probability of a recession in the U.S. stock market to 40%.
JP Morgan also joined the camp predicting a U.S. recession last Friday, with its economists forecasting a 0.3% decline in U.S. real GDP for the year, down from a previous growth forecast of 1.3%, and an unemployment rate rising from the current 4.2% to 5.3%. Following the introduction of the tariffs, JP Morgan raised the probabilities of a recession in the U.S. and globally to 60%, an increase of 20 percentage points from before.
On April 6, Goldman Sachs' research team significantly raised the probability of a U.S. recession over the next 12 months to 45%, a sharp increase of 10 percentage points from previous forecasts. This report also lowered the GDP growth expectation for the fourth quarter of 2025 to 0.5%, halving the original forecast. Just last Monday, Goldman Sachs had raised the probability of a U.S. recession over the next 12 months from a previous 20% to 35%.
Although trade negotiations have increased hopes that the U.S. will ease its protectionist stance, they warn that a new world of higher tariffs is beckoning. In Roubini's view, this indicates that inflation will become tricky, harming long-term bond investors. For the ETF he manages, this is a constructive backdrop, as the fund invests in inflation-protected U.S. Treasuries, municipal securities, and gold trusts.
Since its inception, Roubini's actively managed Atlas America Fund (USAF) has accumulated only $16 million in assets. Year-to-date, this ETF has risen nearly 1%, outperforming the S&amp;P 500 index, which has been hovering on the edge of a bear market for the first time since 2022, as well as the Bloomberg 60/40 index.
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Last week, U.S. 2-year inflation expectations soared to a new high since 2022. The Federal Reserve closely monitors these indicators to help guide its monetary policy decisions, as they indicate movements in actual inflation. Powell even referred to inflation expectations in 2019 as &#34;the most important driver of actual inflation.&#34;
Typically, greater emphasis is placed on long-term inflation expectations, as they are seen as excluding short-term disturbances. One of the long-term inflation expectation market indicators favored by the Federal Reserve—the 5-year forward inflation rate—is currently around 2.3%, down from a peak of 2.47% in January of this year.
He stated, &#34;When there are various tail risks, ETFs should generally perform well. In the medium term, if inflation intensifies, long-term bond yields may rise, which makes you want to invest in short-term bond yields.&#34;
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"Dr. Doom" Nouriel Roubini warns Wall Street that traders should reduce their bets on Federal Reserve interest rate cuts. He expects the U.S. economy to avoid recession, and the Federal Reserve will keep interest rates stable this year. Despite the market facing a sell-off due to Trump's tariff policies, Roubini believes the Federal Reserve will remain cautious and wait for Trump to yield to market pressures. Powell hinted that the impact of new tariffs could exceed expectations, leading to slower economic growth and rising inflation. Traders expect the Federal Reserve to cut rates 3 to 5 times, but Powell stated that now is not the time for rate cuts

"Dr. Doom" Nouriel Roubini: The U.S. economy will avoid recession, and the Federal Reserve will not bail out the market