What if Professor Roubini’s Right? AI Prompting through a Stagflation Scenario

If tariffs rise, inflation remains persistent and geopolitical tensions escalate, how prepared are your investment research workflows?

Welcome back to AI in Investment Research & Finance, your weekly guide to market developments, structured research and high-impact prompting.

In recent issues, we’ve looked at several angles, including value strategies, macro signals, and exchange-traded fund (ETF) positioning, spotlighting funds such as MOAT, SPLV, JEPI, GLD, BITO, EDOG, AIQ, QGRW, OMAH and QAI. We’ve also shown how analysts and fund marketers use large language models (LLMs) to turn raw data into sharper insights.

Table of Contents

• This Week's Focus: Prompting Through a Stagflation Scenario

• 3 Prompts to Navigate a Stagflation Scenario

  • Message from Our Partner: AI with Allie

    • ETF Spotlight: iShares Floating Rate Bond ETF (FLOT)

    • AI Career Moves: Exciting AI Jobs This Week

    • AI in Markets: Key Trends & Upcoming Events

This week, we turn to Professor Nouriel Roubini’s latest outlook as a case study in AI prompt-driven strategy. In a July 6 CNBC interview, Roubini forecasted a “mini stagflationary shock” in the second half of 2025, with persistent inflation near 3.5%, slowing growth, and rising policy and geopolitical risks. He expects the Federal Reserve to maintain high interest rates, with no cuts before December, and places recession odds at about 25%. Moving beyond his earlier “Dr. Doom” persona, Roubini views this period as a stress test for central bank policy and portfolio resilience rather than a trigger for a dramatic market crash.

The question now is how to respond in a potentional stagflation scenario on Wall Street.

• How should exposure shift when growth slows but inflation persists?

• Can floating rate bond ETFs or low-volatility equity strategies offer better resilience than conventional hedges?

• And where can options strategies protect against downside risk while preserving room for upside?

This is where structured prompting sharpens the edge. Let’s dive in:

3 Prompts to Navigate a Stagflation Scenario

These prompts are built to move beyond broad narratives. Use them to stress-test strategies, quantify trade-offs and generate investment insights aligned with real-world complexity.

📌 Prompt 1: Recession Risk, Real Allocation

Act as a portfolio strategist advising a balanced fund in the US. Model asset allocation shifts under a mild stagflation scenario in Q4 2025. Consider floating rate bonds, low-volatility equities, options overlays and rate-sensitive assets. Justify your allocation decisions based on inflation persistence, earnings pressure and Fed expectations. Provide references where applicable.

💡 Why it works: Forces synthesis of macro themes, policy paths and tactical tools—ideal for scenario-based decision making.

📌 Prompt 2: Strategic Hedging with Options

Design a four-leg options strategy to hedge against potential stagflation-related volatility on Wall Street in late 2025. Focus on assets and instruments such as SPY, TLT, USFR and VIX. Outline your rationale, potential payoff profiles and key risks under different inflation-growth regimes. Provide references where applicable.

💡 Why it works: Anchors options thinking in macro context, helping surface asymmetrical hedging ideas.

📌 Prompt 3: Stress-Test the Stagflation Narrative

Act as an economist at a global investment bank. Analyze and challenge the discourse that the US economy may come under stagflationy pressure in the rest of 2025 using multi-factor analysis. Identify whether current market conditions support or weaken the stagflation outlook. Conclude with an investment implication for each outcome. Provide references where applicable.

💡 Why it works: Promotes analytical skepticism and data-driven reasoning, turning narratives into research questions.

ETF Spotlight: iShares Floating Rate Bond ETF (FLOT)

Quick Overview:
• Current Price: $50.88
• 52-week range: $49.75 to $51.34
• Net Expense ratio: 0.15% per year
• Dividend yield: 5.25%

The iShares Floating Rate Bond ETF (FLOT) offers investors a way to earn steady income while managing interest rate risk in today’s uncertain bond market. At the time of writing, the fund trades at a net asset value of $8.9 billion, with a 12-month trailing yield of 5.26% and a 30-day SEC yield of 4.80%. Year-to-date, it has returned 1.95%, and over a 1-year horizon, total return has reached 5.30%.

FLOT was launched in 2011 and tracks an index of U.S. dollar-denominated, investment-grade floating rate notes with maturities between one month and five years. Its ultra-short effective duration of just 0.01 years means the fund is minimally sensitive to interest rate movements, making it attractive in a “higher for longer” policy environment.

The fund holds over 420 bonds, with top exposures to supranational issuers like the International Bank for Reconstruction and Development (8.2%) and Inter-American Development Bank (6%). Financial institutions also dominate, including the Commonwealth Bank of Australia , JPMorgan Chase, and Citibank.

In terms of maturity, nearly 40% of FLOT’s holdings fall into the 1–2 year bucket, followed by 0–1 year (22.8%) and 2–3 years (22.7%). Credit quality is solid: 45.3% of the portfolio is A-rated, 26.8% AAA-rated, and only 5.1% in BBB-rated securities.

With its relatively low expense ratio (0.15%) and consistent monthly distributions, FLOT continues to be an option for conservative investors looking to park cash with yield, without taking on much duration or credit risk.

🧠 AI Prompt for Further Exploration:

As a multi-asset portfolio strategist, evaluate how floating-rate bond ETFs like FLOT compare to Treasury Inflation-Protected Securities (TIPS) and short-term corporate bonds in today’s US economy. Which option offers better capital preservation and interest rate risk management over the next 6 to 12 months? Consider factors such as credit quality, duration, yield and macroeconomic sensitivity. Based on your analysis, suggest an optimal allocation mix for a balanced portfolio.

AI Career Moves: Exciting AI Jobs This Week

Looking for your next opportunity in AI? Explore these standout roles across industries and locations:

 📩 Feel free to share this list with anyone looking for AI opportunities!

AI in Markets: Key Trends & Upcoming Events

🤖 AI & Cloud Innovation Summit Scotland – Edinburgh, Sept 11
Held at Dynamic Earth in Edinburgh, this one-day summit will explore how AI and cloud technologies are transforming sectors such as healthcare, energy and government.

⚙️ AI “Digital Workers” Are Becoming Banking Colleagues
BNY Mellon has deployed AI-driven “digital employees” with official logins and managerial oversight to handle tasks like code reviews and payment validation. These digital colleagues are being integrated into broader workflows, and may soon communicate via email and Teams, marking a significant leap for AI in operations.

🧠 AI-Powered Research Tools Launch
Bloomberg has launched its Document Search & Analysis feature, allowing Terminal users to ask natural-language questions across documents like earnings transcripts, filings, and internal notes. The AI-driven summaries are attributed clearly to both sources and analysts to enhance transparency and support quicker insight generation.

Stay tuned for next week’s edition, where we’ll explore new AI prompts for deeper sector analysis. To ensure our next newsletter lands in your Inbox, please add our email address to your contacts: [email protected]