Investor Kathy Wood accused the Fed of pushing America into a recession. is he right?
Kathy Wood: The Fed is pushing the US economy into recession
According to Kathy Wood in an interview, the US Federal Reserve uses old data such as US consumer prices (CPI) and US producer prices (PPI) and adjusts its monetary policy accordingly.
According to Kathy Wood, the United States is already in recession after two negative quarters in a row. Unlike in 2008 after the US real estate bubble burst, however, this time there were no excesses that would exacerbate the recession.
No redundancy? Malicious gossip claims Cathy Wood’s ARK Innovation price is a prime example of growth oversupply – with the introduction of the Fed’s ultra-loose monetary policy in response to the Corona crisis in spring 2020, ARK Innovations rose by several 100%:
But somehow the fate of Kathy Wood is over – or more precisely the monetary policy of the Fed, which is now stepping on the brakes with higher interest rates after the flood of liquidity caused by extreme inflation. And it doesn’t bode well for the stocks Kathy Wood prefers to hold in her portfolio, as they’ll introduce a lot of “innovation” (unfortunately sometimes the business model is missing).
In times of rising interest rates, when investors can no longer afford money, they want to look at the facts and not just believe in beautiful dreams of innovation. Result: While ARK Innovations was still at 137 US dollars at the beginning of the year, the ETF can now recover up to 50 US dollars after a crash. This is still a pretty drastic sell-off that can cost many investors big bucks – many are known to hit higher levels on the hype.
Why did Kathy Wood blame the Fed?
But back to Kathy Wood’s statements: The fact that the Fed is overreacting to old data on inflation is particularly evident from the copper economic barometer, which has already fallen massively from its highs. Last Friday’s strong US jobs data will also hide the state of the US economy – according to Kathy Wood, indicators such as home employment, challenging layoffs or US first-time job applications are better than what can be expected from a “boom”. Business.
So is the Fed all wrong about the economy? Kathy Wood seems to think so. But he has reason to believe so: The rate hike is effectively ruining his business and reducing his stock. As such, she thinks the Fed is genuinely incompetent — but there’s probably a lot of selfishness at play, too. Because should the US Federal Reserve return to an ultra-loose monetary policy, even Wood’s “innovation stocks” would outperform again. So you can put it like this: Kathy Wood advocates for her own trading book!
And with this argument she welcomes every argument: The bond market, for example, will clearly show that inflation will soon be over, which is why it is still a good idea to invest in innovations.
But one thing seems clear: innovation only works well when money is easy. Until then, investing in Kathy Wood’s ARK Innovations and its other products will be a risky proposition.
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