To The Moon

1.Cathie Wood Wrote Publicly to Question the FED

ARK Investment Management's Cathie Wood published an open letter to the FED on Monday, October 10. In the open letter, Wood said the Fed's hawkish stance on inflation may be wrong.

“the Fed is making a policy error that will cause deflation, we offered some data for our “data-driven” Fed to consider as it prepares for its next decision on November 2. In the face of conflicting data, the unanimity of the Fed’s last decision to increase the Fed funds rate by 75 basis points was surprising.”

Commodity prices are leading indicators, upstream in the stages of processing. Most commodity prices have peaked and, except for food and energy, are falling on a year-over-year basis, as shown below. 

Source: ARK Investment Management LLC, 2022. Data from Bloomberg as of last close, 10/7/2022.

Bisides that，Wood noted: The Fed seems focused on two variables that, in our view, are lagging indicators––downstream inflation and employment––both of which have been sending conflicting signals and should be calling into question the Fed’s unanimous call for higher interest rates.

Indetails: Downstream, inventory accumulation seems to be overwhelming manufacturers and retailers. for like inventories at $Wal-Mart(WMT)$ and $Target(TGT)$ increased 25.5% and 36.1%, respectively, during the most recent quarter. $Nike(NKE)$'s recent quarterly results suggest that the inventory imbalances have worsened. In the auto sector, used car price inflation as measured by the Manheim used value index peaked, Facing inventory losses, used car dealers are likely to disgorge more inventories, which could push price inflation deeply into negative territory.

2. ARK ETFs vs. $(SARK)$

It’s not hard to see that Cathie’s team also complained that the Fed might go too far, potentially pulling the U.S. and global economy into an unnecessary recession.

Full link from ARK: https://ark-invest.com/articles/market-commentary/open-letter-to-the-fed/

You must know that ARK’s funds mainly invest in technology and innovative technology companies, mainly investing in innovative technology companies that the company expects to achieve long-term growth in the next 5 to 10 years, and now has 6 active ETFs ($ARKK(ARKK)$ , $ARKW(ARKW)$ ,$ARKG(ARKG)$ ,$ARKW(ARKW)$ ,$ARKQ(ARKQ)$ ,$ARKF(ARKF)$,$ARKX(ARKX)$) and 2 passive ETFs ($IZRL(IZRL)$ ,$PRNT(PRNT)$).

Let's take a look at how the ARK ETFs perform under rate hikes. Since the start of the rate hike cycle in December 2021, several of ARK ETFs have generally fallen by more than 50%. All far outpaced the performance of the major US stock indexes.

Once the holdings of ARKK ETFs are market stars being tracked by investors. While under the environment of eagle interest rate hikes, companies which sensitive to rate hikes must have experienced sufferings. In addition with comprehensive macro environment of high inflation, recession forecast,  bearish investing mood . The overall willingness to long stocks, especially technical stocks is very pessimistic.

There are some smart investors found that if interest rate hikes continue to be strong, and you are not optimistic about the next performance of ARK ETFs. Can buy inverse ETF $SARK(SARK)$.  As of post，SARK's 1 year performance is 102.62%.

Question For You:

Do you agree with Cathie Wood's open letter content?

Do you have question in $SARK(SARK)$