Cathie Wood slams Fed’s hiking action in lengthy Twitter thread –

Cathie Wood is once again stirring debate with a lengthy admonishing of the Federal Reserve’s policy decisions, delivered as a series of Tweets late on Sunday (19 June).

The ARK Invest founder opened by criticising the central bank’s emphasis on inflationary measures, which led to a 75bps rate rise at its June meeting. Wood said the prospect of further rises overlooks factors she believes are of huge concern.

‘The Fed seems to be worried more about its legacy than the economy: it is ignoring deflationary and dangerous signals. Relying on lagging inflation indicators like the CPI, Fed Governor Waller is calling for another hike of 0.75% in July,’ she wrote.

‘As measured by Markit, credit default swaps (CDS) – insurance policies against bankruptcies – have doubled this year, surpassing their peaks during the market rout in late 2018 and heading for Covid crisis levels. Money center [sic] bank CDS spikes are particularly concerning.’

The 11-Tweet thread (see below) garnered hundreds of replies and more than 1,000 retweets at the time of publication. Further into the discussion, Wood said her team is working on the basis that the US market is already in recession, as opposed to nearing recession – which is what she believes the Federal Reserve is focusing on currently.

She highlighted the huge decline in consumer sentiment, which she said has hit its lowest levels since 1940, while also dipping below those seen during the global financial crisis. Wood cited a University of Michigan study to back her point.

The outlook

Looking ahead, Wood said the movement of raw and natural materials is an important indicator of where the market is headed. She cited the fact that gold hit nearly $2,000/oz in 2020 but has dropped steadily over the last two years.

‘If inventories and stock prices are leading indicators for employment and wages, which in this case I believe they are, then fears of cost-push inflation a la 1970’s should disappear during the next six months,’ she wrote.

‘Finally, while the …….


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