Cathie Wood just wrote an open letter to the Fed accusing it of stoking ‘deflation’ and looking at the wrong economic indicators

S&P Futures




Dow Futures




Nasdaq Futures




Russell 2000 Futures




Crude Oil
















10-Yr Bond




















CMC Crypto 200




FTSE 100




Nikkei 225




The Federal Reserve has raised interest rates at the fastest pace since the 1980s this year in an attempt to cure America’s inflation problem. But now, many economists and business leaders are beginning to question whether the medicine (rate hikes) could be worse than the disease (inflation).

Among those is Cathie Wood, the CEO and CIO of investment firm ARK Invest. On Monday, Wood penned an open letter to Fed officials accusing them of making a “policy error” with their interest rate hikes.

She argues that Chair Jerome Powell & Co. are using “lagging indicators”—including employment and headline inflation—to justify tighter monetary policy when they should be using “leading indicators” such as commodity, used car, and home prices that tell a very different story.

Wood, who began her career on Wall Street in the 1970s and served as AllianceBernstein’s chief investment officer for over a decade, believes that the Fed’s rapid rate rates in the face of a global economic slowdown will ultimately lead to persistent deflation worldwide—which can have devastating effects on economies.

Of course, rising interest rates have also hurt ARK Invest’s tech- and growth-focused funds in 2022, leading to billions in profits for short-sellers betting against her. After years of outperformance in low interest rate environments, ARK Invest and funds like it are facing a new reality as borrowing costs for growth-focused firms soar.

But on Monday, Wood said her concern was merely deflation and the potential for a global “bust” as a result of the Fed’s policies.

“Out of concern that 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 Nov. 2,” she wrote.

ARK Invest’s case against the Fed

Wood and her team of analysts at ARK Invest believe inflation is already on its way down, and in their letter to the Fed, they put together some evidence that they believe illustrates why.

First, they detailed the drop in key commodity prices in recent months, showing that copper prices, which are an important indicator of economic strength, are now down 31% from their peak, while lumber and oil prices have dropped 74% and 25%, respectively.

Second, they noted that home prices, which soared throughout the pandemic and exacerbated inflation, posted their first monthly drop since May 2020 in July, falling 0.6%, according to the Federal Housing Finance Agency.

Inventories at major retailers like Target, Nike, and Walmart have jumped dramatically this year as well, which could lead to discounts for consumers, Wood said. To her point, discounts in key categories like electronics and toys are expected to hit all-time highs this year, according to an Adobe Analytics study released on Monday.

On top of that, after soaring throughout the pandemic, wholesale used car prices fell 3% in September, according to Manheim’s used car index.

Wood argued that all of this data shows that inflation has peaked and is beginning to fall back down toward the Fed’s 2% target rate, which means more interest rate hikes rates aren’t necessary and could lead to a global “deflationary bust.”

A deflationary threat?

While economists and consumers have been captivated by inflation’s rise over the past two years, in the decades before that, and particularly in the era after the Great Financial Crisis, deflation was the Fed’s main fear.

In August 2021, Fed Chair Jerome Powell said in a speech at an annual symposium in Jackson Hole, Wyo., that disinflationary forces including technological innovation, globalization, and “demographic factors,” have helped keep inflation at bay over the past 25 years.

“While the underlying global disinflationary factors are likely to evolve over time, there is little reason to think that they have suddenly reversed or abated,” he added. “It seems more likely that they will continue to weigh on inflation as the pandemic passes into history.”

This year, however, Powell has taken a new tone, arguing that price stability is “unconditional” and that he will continue fighting inflation even if there is some “pain” for Americans.

Wood believes these policies aren’t necessary, and that the deflationary impact of technological innovation will ultimately slay inflation with or without the Fed. But it’s important to note that the CEO has something to gain if the Fed reverses course.

The ARK’s saving grace

Rising interest rates have dramatically impacted the growth-focused tech firms that ARK Invest’s funds favor in 2022.

The ARK Innovation ETF, for example, rose 152% in 2020 when low interest rates and stimulus spending helped fuel tech stocks to new heights. But this year, with the Fed tightening financial conditions, Wood’s flagship fund is down over 62%.

Many of ARK Invest’s innovation-focused tech investments that rely on debt-fueled growth to justify high stock prices are seeing their margins squeezed as borrowing costs soar. And at the same time, there are far fewer speculative tech investors in the markets these days, with predictions of an impending recession coming in day after day.

Tech-focused funds have struggled this year as a result, and a Fed pivot would definitely help turn things around.

But despite CEOs like Cathie Wood and Starwood Property’s Barry Sternlicht calling for the Fed to pause its rate hikes or even pivot to rate cuts, Fed officials have made it clear in recent weeks that they aren’t changing their plans anytime soon.

“You no doubt are aware of considerable speculation already that the Fed could begin lowering rates in 2023 if economic activity slows and the rate of inflation starts to fall. I would say: not so fast,” Atlanta Federal Reserve president Raphael Bostic said last week.

This story was originally featured on




Down More Than 60%: Analysts Say Buy These 3 Beaten-Down Stocks Before They Rebound

After the annus horribilis of 2022, with the final quarter now in play, investors will be hoping a late-year rally will materialize. According to Carson Group’s chief market strategist Ryan Detrick, that’s not such a far-fetched idea. “While October has a reputation for crashes, it is really a bear market killer,” Detrick recently wrote. “Of the past 17 bear (or near bear markets), stocks bottomed in October six times. Could it happen again? With sentiment this pessimistic and extremely positive


Top Analyst Reports for NVIDIA, Pfizer & Citigroup

Today’s Research Daily features new research reports on 16 major stocks, including NVIDIA Corporation (NVDA), Pfizer Inc. (PFE) and Citigroup Inc. (C).

Yahoo Sports

Week 5 Recap: Taysom Hill shows off, Ekeler has another big day & the Giants keep winning

Matt Harmon and Scott Pianowski get together on Sunday night following a full day of NFL Week 5 action to recap each and every game that they watched from a fantasy perspective.


Analysts Say Buy These 2 High-Yield Dividend Stocks — Including One With 16% Yield

Markets finished last week on a down note, with the S&P 500 and the NASDAQ falling 2.8% and 3.8%, respectively. The Friday collapse came in the wake of the September jobs report, which further fed into investor worries that the Federal Reserve will continue pushing interest rate hikes even at risk of a recession. The headline number, 263,000 new jobs in the month, came in below the forecast of 275,000, and was well below the August print of 315K. At the same time, the headline unemployment rate


GLOBAL MARKETS-Stocks ease as investors eye economic data, rate hikes

The MSCI global index of stocks was in the red in a volatile session on Monday while the dollar gained slightly as investors braced for economic data and earnings season. Any lingering hopes that the Federal Reserve could shift to a softer stance toward monetary policy appeared to be extinguished on Friday as the September jobs report pointed to a persistently tight labour market. Oil futures sold off and Wall Street’s stock indexes were volatile, while U.S. bond markets were closed for the day for a federal holiday.

The Wall Street Journal

Nobel Prize in Economics Winners Include Former Fed Chair Ben Bernanke

The other two winners were Douglas Diamond and Philip H. Dybvig, whose work helped governments and central bankers navigate the global financial crisis and avoid a 1930s-style depression.

ProFootball Talk on NBC Sports

NFL’s football-tracking technology shows just how perfect Justin Tucker’s game-winner was

Justin Tucker‘s game-winning field goal on Sunday night couldn’t have been more perfect. Tucker, the Ravens’ kicker who nailed a 43-yard field goal as time expired to beat the Bengals, kicked the ball so dead-center that at the time it went over the crossbar, it was almost perfectly between the two uprights. According to Michael [more]


CORRECTED-UPDATE 2-JPMorgan CEO Dimon warns of recession in 6 to 9 months – CNBC

JPMorgan Chase & Co Chief Executive Jamie Dimon said the United States and the global economy could tip into a recession by the middle of the next year, CNBC reported on Monday. Runaway inflation, big interest rates hikes, the Russian invasion of Ukraine and the unknown effects of the Federal Reserve’s quantitative tightening policy are among the indicators of a potential recession, he said in an interview to the business news channel.


Maersk Rides Highs and Lows of Shipping’s Roller-coaster Year

(Bloomberg) — A.P. Moller-Maersk A/S is having either the greatest year in its 118-year history or the worst in more than a decade, depending on whether you look at its profits or stock performance.Most Read from BloombergHere’s How Weird Things Are Getting in the Housing MarketThis Is What 7% Mortgages Will Do to the Housing MarketScreening Procedure Fails to Prevent Colon Cancer Deaths in Large StudyCathie Wood Warns of ‘Serious Losses’ in Automobile DebtUkraine Latest: Biden Pledges Air Defe

Leave a Reply

Your email address will not be published. Required fields are marked *