Cathie Wood, Founder, CEO, and CIO of ARK Invest, has been consistently concerned about the deflationary effects caused by the Federal Reserve’s constant interest rate hikes. This time, the hedge fund manager has penned an open letter to the Fed on her ARK Invest website, hoping to get immediate attention on the matter. Cathie noted that the Fed’s rate hikes have “shocked not just the US but the world and raised the risks of a deflationary bust.”
Cathie questioned the Fed’s stance on rapidly increasing interest rates based on lagging indicators like downstream inflation and employment. On one hand, both the consumer price index and the personal consumption expenditures index showed year-over-year growth in readings, indicating high inflation. On the other hand, the unemployment rate is falling.
Cathie believes that the Fed should be considering leading indicators like commodity prices for any decisions going forward. She added that declining prices for lumber, copper, and housing foretell a different story.
In June 2022, Cathie noted that the spike in credit default swaps coupled with the negative economic sentiments shared by the likes of Elon Musk were signals of a fast-approaching deflation.
Furthermore, Cathie even pointed to the excess inventory issues at retailers and the falling prices of used cars as signals of deflation.
Amid the economic slowdown, Cathie’s ARK line of funds has massively underperformed the benchmarks. The flagship ARK Innovation ETF (NYSE:ARKK) has tumbled nearly 63% so far this year.
What is ARKK’s Biggest Holding?
Currently, electric vehicle maker Tesla (NASDAQ:TSLA) remains the biggest holding in ARKK with 9.20% of the portfolio. This is followed by videoconferencing company Zoom Video Communications (NASDAQ:ZM) at the number two spot.
