Cathie Wood, the head of Ark Investment and known as the "female Buffett", said on Tuesday that various industries in the United States have begun to experience deflation, which will force the Federal Reserve to initiate a cycle of significant interest rate cuts.
She said in an interview, "The Federal Reserve has gone too far and we will see more deflation. If we are right, they have gone too far and they will have to cut interest rates significantly
Wood added that the CPI inflation rate may turn negative at some point next year. Inflation in the United States generally slowed down in October, and the market is encouraged by this as a strong sign that the Federal Reserve is ending interest rate hikes.
The latest data released by the Bureau of Labor Statistics (BLS) of the US Department of Labor shows that the nominal CPI remained unchanged month on month in October, with a year-on-year growth rate dropping to 3.2%, lower than September's 3.7% and the lowest level since June last year. At the same time, the year-on-year growth rate of core inflation, excluding food and energy prices, also slightly decreased to 4.0%, lower than consensus expectations.
Wood's prediction contradicts the consensus on Wall Street. A media survey shows that economists expect the annual inflation rate to drop from 3.2% in October to 2.7% next year.
She said that the deflationary trend that started with commodities is now extending to aviation and car prices. For a long time, she has been looking forward to an era of price decline with the support of new technologies such as artificial intelligence, electric vehicles, robots, and genome sequencing. She has also criticized the Federal Reserve before, stating that its aggressive interest rate hikes may increase the risk of deflation bursting.
Wood's flagship fund ARK Innovation ETF (ARKK) has risen by nearly 38% so far this year, after a decline of approximately 23% in 2021 and 67% in 2022.
Although ARKK has risen this year, it still lags behind the Nasdaq 100 index, which is dominated by technology stocks, with a gain of about 44%. Companies such as Nvidia Corp., Microsoft Corp., and Apple Inc. are driving the rise of the Nasdaq 100 Index, and are not included in the Wood ETF portfolio.
We have paid the price, "Wood said." As of July, we had a wonderful year, but as concerns about inflation rise again, we have experienced some setbacks. But I think today's (CPI) report is very important because we can see a decline in prices. You will see a lot