In the latest episode of In The Know, renowned hedge fund manager Cathie Wood discussed her reasons for believing that the economy is already in a recession. The CEO and CIO of ARK Invest funds invest in disruptive technology stocks as a means to fight inflation. Cathie shared the video on Twitter (TWTR) and also reiterated her stance that deflation would be a bigger problem for the American economy than inflation.
“Two consecutive quarters of GDP declines is the beginning of that definition. Three consecutive months of declines in leading indicators, which we have now, would suggest the same,” Cathie also said in an interview on Bloomberg.
While several economists and experts forecast that the U.S. may enter a recession next year, Cathie believes that the U.S. will be coming out of it in 2023. She believes that the current recession is not a systemic one like the crisis of 2008-09, instead, it is an inventory-driven recession.
Furthermore, Cathie even noted that although Friday’s nonfarm payroll jobs data showed a massive jump, household employment, which is a broader survey of employment, “has been flat to down for the last four months.”
Most importantly, Cathie believes that deflation, which is marked by a general drop in the prices of goods and services, poses a bigger threat to the U.S. than inflationary pressure. Referring to a rise in layoffs and unemployment benefits claims, Cathie noted that these are signs that the U.S. economy is “very weak.” Consequently, she believes that the Federal Reserve will start reducing interest rates in 2023.
As always, Cathie’s views were disregarded by Twitterati. Replies flooded in bashing her views and questioning her knowledge of the subject matter.
Notably, ARK funds have severely underperformed the market this year, and this has attracted a lot of criticism for Cathie. Her flagship ARK Innovation ETF (ARKK) has fallen 47.8% so far this year.