ARK Invest CEO Cathie Wood says there is a way to avoid a recession—but it remains an unlikely path forward.
Key Details
- In a recent episode of In the Know, Wood discussed room temperature superconductors, Bitcoin, Fed policy, and U.S. credit being downgraded.
- Wood also discussed her thoughts on the possibility of an economic soft-landing—whether it is possible to avoid a recession in the next year narrowly.
- She says the solution relies on companies avoiding layoffs and accepting lower margins to avoid spiking the unemployment rate.
- Wood is skeptical that companies would accept lower margins amid falling prices, thus necessitating a recession.
Why It’s Important
Market analysts have been predicting since last year that an economic recession is inevitable, and some have even declared the U.S. to already be in one at several points last winter due to the overall economic decline and slowing numbers. While high inflation, high-interest rates, and a tightening jobs market have slowed the economy, it has not yet met the technical definition of two consecutive quarters of negative growth.
Analysts have been overly optimistic about the possibility of avoiding a recession. The economy has proven surprisingly resilient despite a 5.25% hike in interest rates over the past 16 months. Fed Chair Jerome Powell noted “We do have a shot” of avoiding massive job losses and sparking a recession. Bank of America economists followed up, rescinding their prediction of a mild recession in early 2024.
Notable Quote
“If prices went down and companies were willing to accept lower margins without firing people—right now they’re hoarding people—if they’re willing to accept much lower margins as prices come down, then I think we’d have a soft landing because the unemployment rate would not go up. I do think they’re going to cut labor because the full impact of monetary policy has yet to be felt. We could be experiencing the impact of tight monetary policy for the next 18 months,” says Wood.
