‘we were wrong on inflation’

The U.S. economy is yet to check the technical definition of a recession, but Cathie Wood is convinced that we’re already in one.

Highlights from Wood’s interview on CNBC

Her thesis is partly driven from consumer sentiment that, she says, currently sits at levels not seen over the past forty-five years. This morning on CNBC’s “Squawk Box”, the influential investor said:

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We think we’re in a recession. Consumer sentiment is down to record low levels. Below 2008-09 and 1980-81. And most interestingly, consumer sentiment in the highest income groups is lower than in the lowest income groups.

Earlier this month, the Federal Reserve resorted to its biggest rate hike (75 bps) since 1994 that many warn has minimised the chances of a soft landing. The S&P 500 index is down 18% year-to-date.

Wood agrees she underestimated inflation

U.S. CPI hit a new forty-year high of 8.60% in May. Wood agrees that she didn’t foresee inflation being a headwind for this long. Her flagship Ark Innovation ETF is down nearly 55% versus the start of 2022.

We were wrong on one thing and that’s inflation being as sustained as it has been. Supply chain, can’t believe it’s taken over two years. And Russia’s invasion of Ukraine, of course, couldn’t have seen that.

She, however, reiterated that her fund will generate lucrative returns for the long-term investors over the next five years. According to FactSet, ARKK secured more than $180 million in inflows this month.