Ark Invest’s Cathie Wood doubled down on her deflationary call, predicting a major policy reversal from the Federal Reserve as early as three months. “I wouldn’t be surprised to see a significant policy change over the next three to six months,” Wood said in a tweet Wednesday night. “The Fed seems to respond to 15-month COVID-related supply shocks in much the same way that Volcker’s battle with inflation has been molded and built up over 15 years…. Powell is using a sledgehammer. of Volcker and I believe a mistake was made.” Wood compared Fed Chairman Jerome Powell to Paul Volcker, the Fed chief under Presidents Jimmy Carter and Ronald Reagan, who helped tame inflation in the 1980s with 20% interest rates also weakening the economy. economic. The innovation-focused investor said the central bank is now basing monetary policy decisions on lagging indicators: employment and core inflation. She said a number of leading indicators are signaling inflation may have peaked. She noted that gold, traditionally an inflation hedge, hit a high more than two years ago. Other commodities including lumber, copper, iron ore and oil are all down double digits from their highs, Wood said. “On the schedule, inflation is turning into deflation,” Wood said. “Leading inflation indicators like gold and copper are flagging deflation. Even oil prices have fallen more than 35% from their peaks, erasing most of this year’s gains.” Wood’s comments come even as Fed officials dismiss the idea of a near-term policy axis. On Thursday, Powell vowed to raise interest rates to fight inflation “until the job is done.” The Fed has raised its benchmark interest rate four times this year, with the lending rate now set in the range of 2.25%-2.50%. Markets are expecting the Federal Open Market Committee to set rates to rise 0.75 percentage points for the third time in a row when it meets again on September 20-21. Disruptive tech enthusiasts Wood’s has been among the biggest losers this year due to rising rates. Her flagship Ark Innovation ETF (ARKK), which is down 56% year-on-year to date, has just suffered three consecutive months of out-of-capital. “Innovation solves problems, and today’s world is facing more problems than it was two years ago. Innovation is the key to real growth!” Wood said.
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