Cathie Wood says US inflation will turn negative in 2024

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(Bloomberg) — Cathie Wood said the U.S. is already experiencing deflation across all industries, and the Federal Reserve will be forced to begin a cycle of major rate cuts.

“The Federal Reserve has gone too far, and we’re going to see more deflation,” the head of ARK Investment Management told Bloomberg TV on Tuesday. “If we’re right and they’re going too far, we’re going to have to make some pretty significant cuts.”

He added that CPI inflation could turn negative “at some point next year.” U.S. inflation generally slowed in October, which markets welcomed as a strong sign that the Fed is done raising interest rates. The aforementioned data was released on Tuesday.

Wood’s predictions clash with the Wall Street consensus. Economists expect annual inflation to fall to 2.7% next year from 3.2% in October, according to a Bloomberg survey.

Read more: US inflation slows significantly, eliminating bets on further Fed rate hikes

Wood said the deflationary trend that started with primary goods has now spread to airline ticket and car prices. She has long predicted an era of falling prices, supported by new technologies such as artificial intelligence, electric vehicles, robotics, genome sequencing and blockchain. She has criticized the Fed before, saying aggressive interest rate hikes could increase the risk of deflationary collapse.

ARK’s flagship fund

After a big 2020, Wood’s flagship stock, the $6.9 billion ARK Innovation ETF (ticker ARKK), fell about 23% in 2021 and 67% in 2022. It’s up 33% so far this year.

“We paid our dues,” Wood said. “We had a great year up until July, but we took a bit of a step back as inflation concerns rose again. But I think today’s report is really important in terms of looking at that and seeing prices come down. I think you’ll see a lot of them.

Read more: Cathie Wood eyes a revival of thematic investing as interest rates fall

Despite ARKK’s gains this year, the fund still lags the tech-heavy Nasdaq 100, which is up about 44%. The rally has been driven by companies that aren’t in Wood’s ETF, including Nvidia, Microsoft and Apple.

–With assistance from Romaine Bostic.

(Updates heading and adds details in paragraph 4.)

©2023 Bloomberg LP

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