Coming off a sluggish 2022, one of the most successful investors on Wall Street has seen incredible success recently—and now she is predicting a change in direction for the Federal Reserve.
Key Details
- ARK Investor CEO Cathie Wood has done much in the past few years to turn her company into one of the leading voices on Wall Street, and her successes led to her Thursday statement to Bloomberg that “we are the new Nasdaq.”
- In the past few months, she’s called out the Federal Reserve’s tightening policies, defended the long-term viability of cryptocurrency, and found opportunities in the dips that the market has felt in the past 12 months.
- Now her predictions about the bond markets are signaling a cycle of deflation appear to be coming true as the Fed begins to slow its tightening policies, The Street notes.
Why It’s News
With ARK Innovation ETF outperforming the Nasdaq 100’s recent returns, Cathie Wood has good reason to feel confident in her direction and ability to read the market. She’s already starting to make bold claims, saying Bitcoin’s value will exceed $1 million over the next decade.
As we previously reported, Fed Chair Jerome Powell announced the Fed’s eighth consecutive interest rate hike on Wednesday, February 1—raising interest rates to a range of 4.5% to 4.75%.
Wood has been very forthcoming that the Fed’s policies have adversely affected the market. ARK is a leading investor in tech startups, and she says they’ve been struck by the Fed’s policies. “Innovation was one of the biggest victims of the massive interest rate increase we saw last year. We felt it every time chairman Powell spoke,” Wood says.
This recent hike represented one of the smallest thus far—25 basis points. The Fed has shrunk its hikes twice in a row now, which Wood says is a signal that the Fed is beginning to recognize that it needs to back away from additional hikes, lest the economy gets trapped in a cycle of severe monetary deflation.
It must be noted that ARK Invest’s lead fund the ARK Innovation ETF was down more than 65% during 2022—a precipitious drop that was more dramatic than the Nasdaq and other benchmark funds.
Notable Quote
“The bond market always leads the Fed, and the bond market is speaking loudly … We’re getting a lot of deflationary signals, but the Fed isn’t buying in yet. But the bond market will start to convince the Fed. The bond market is telegraphing much lower-than-expected inflation and/or recession,” says Wood.
