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High-profile stockpicker Kathy Wood has admitted she erred in periods of high inflation, which contributed to her fund’s sharp fall this year, while reaffirming her belief the economy has entered a recession — a recession that is about to end unlikely this year, despite rising probabilities, is one next year that defies the vast majority of pundits and is recession-eyed.
“We were wrong about one thing – and that was that inflation stayed stable as it was,” Wood said. [+] Defiant economists on Tuesday forecast the US will avoid a recession this year.
Photo by David Yellen/The Forbes Collection
Important facts
“We think we’re in a recession,” Wood, founder and CEO of Ark Invest, based in New York City, said on CNBC Squawk box On Tuesday, the economy faces a “major problem” that finds excess inventory is driving up costs and resulting in a lack of better-than-expected profits for companies like Walmart and Target.
Wood had said last week that the US was in a recession, warned Twitter These massive inventories (often seen as a leading indicator of demand) have the potential to slow and weigh on growth for the remainder of the year as consumer sentiment records lower levels.
On Tuesday, Wood also admitted to being wrong about inflation “persistent as it was,” acknowledging that it was a “big problem” that he believed had been with Russia over the past year impact on Ukraine will occur. Given the shortage of supplies from the invasion.
The money manager’s comments came a week after Elon Musk, whose Tesla is one of Arc’s largest holdings, called a US recession “inevitable” and said a recession was “more likely” in the short term, though they didn’t does not offer a specific schedule.
The US economy contracted an unexpected 1.5% last quarter as the Omicron version of Covid-19 swept the country, but economists are widely calling for a return to growth this quarter, resulting in two consecutive quarters of negative GDP growth led. Avoid what constitutes a technical bear market. ,
but myself Squawk box On Tuesday morning, New York Fed Chairman John Williams said a recession is not the most likely scenario, noting that “the economy is strong” although growth is expected to slow in the coming quarters as the Fed raises interest rates. Is.
tangent
Arch Invest’s flagship fund has posted staggering losses this year as top holdings like Tesla, cryptocurrency exchange Coinbase and virtual healthcare company Teladoc all posted staggering losses amid a sell-off in the broader market. After skyrocketing 150% in 2020, the fund is down nearly 70% from its all-time high in January 2021 and over 50% this year alone.
Disadvantage
In a research note on Monday, analysts at S&P Global Ratings said the economy had enough momentum to avoid a recession this year but warned that “the tipping point is just around the corner next year.” Economists were forecasting a recession in 2023. 40% higher than the 35% rate released by Morgan Stanley last week. However, some were more optimistic: In a recent note, financial analysts at LPL said a recession is likely closer to 33%, if not less, as corporate earnings are healthy and inflationary pressures prevail. Less likely, even if “the road there is not easy for the markets”.
main background
The Fed’s withdrawal of pandemic stimulus has dented stocks and fueled recession fears. Major stock indexes plunged into bear markets earlier this month ahead of the Fed’s biggest rate hike in 28 years, and gloomy sentiment recently sparked waves of layoffs at fast-growing tech and real estate companies. . “We don’t think the Fed can stop the problems causing supply-side inflation without completely wrecking the economy, but at this point they seem to have resigned themselves to the fact that it needs to be done,” he says Brett Ewing, chief market strategist at First Franklin Financial Services.
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Arch Invest CEO Kathy Wood’s net worth shrank 65% as tech bets turned sour in 2022 (Forbes)
‘Give Us Five Years’: Kathy Wood defends troubled tech stocks as flagship fund crater (Forbes)
Kathy Wood’s Arch fund slows to a two-year low as Teladoc stock plummets and Tesla slips again (Forbes)
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