The innovation themed asset manager Cathie Wood believes that Jerome Powell and the Federal Reserve are miscalculating the outlook on inflation by increasing rates at such a steep pace.
Woodtweetedout: “Powell is using Volcker’s sledgehammer and, I believe, making a mistake.”
Wood continued with: “The Fed is basing monetary policy decisions on lagging indicators: employment and core inflation. Leading inflation indicators like gold and copper are flagging the risk of deflation. Even the oil price has dropped more than 35% from its peak, erasing most of the gain this year.”
For the upcoming September 21stFed meeting futures are now pricing in an 82% chance that markets will see a 75-basis point hike compared to the 18% that are factoring a 50% rate hike.
It was just a month ago when markets were pricing in a 68% chance of a 75-basis point hike. Powell’s hawkish rhetoric delivered at the Jackson Hole economic symposium caused 14% swing, sending the target rate probability to 300-325 basis points for the upcoming Fed meeting.
Cathie Wood’s innovative ETFs along with their year-to-date price action: (NYSEARCA:ARKK)-57.2%, (NYSEARCA:ARKW)-57.9%, (ARKF)-58.2%, (BATS:ARKG)-43.6%, (BATS:ARKQ)-35.7%, and (ARKX)-26.3%.
While Wood may believe the Fed is making a mistake, Seeking Alpha contributor Rida Morwa highlighted that hikes are coming and will not stop until the Fed thinks it has beaten what it first denied existed -persistent inflation.
