The U.S. Federal Reserve signalled a terminal rate of 4.6% last week but Cathie Wood – Founder of Ark Investment Management remains convinced the central bank will “pivot”.
U.S. is already in a recession
On Tuesday, orders for durable goods were reported down 0.2% in August; less than a 0.4% decline that economists had predicted. Still, the star investor says that does not indicate a resilient economy.
We believe we’re in a recession. We’re seeing the strength in durable goods orders because of activity being attracted to the U.S. – a flight to safety. That’s why our dollar has been going up as well.
In July, demand for gasoline was the lowest since 1997, which, according to her, is a sign that inflation has already peaked. Earlier this month, though, the Bureau of Labour Statistics said the CPI was actually up 0.1% in August. (detailed here)
Fed is focusing on lagging indicators
This morning on CNBC’s “Squawk Box”, Wood warned the FOMC was predicating its monetary policy on lagging indicators (consumer prices and employment) and acknowledged the possibility of sequential “deflation” in the coming months. She added:
In the last week, both Japan and China have supported their currency. They’re selling dollars and buying their own currencies. So, effectively, China and Japan are doing some of the easing we think the Fed will do.
The influential investor expects inflation to surprise to the downside in the coming years. At writing, the S&P 500 index is trading below its June low.