Cathy Wood says the US is in a recession and its growth fund has fallen to the bottom

  • Ark Invest’s Cathy Wood told CNBC that the economy is in the doldrums and the labor market is on the cusp of a slowdown.
  • Wood said the Fed is focusing on lagging indicators such as the CPI and jobs data, as a reason why her view differs from Fed Chair Jerome Powell.
  • Wood said its flagship growth fund is likely to do well, having bottomed long before the broader market.

Kathy Wood of Ark Invest is sure that the US economy has already entered a recession, according to an interview with CNBC on Friday.

Wood says.

Recent earnings results from Snap and Meta Platforms reveal that advertisers have already been slowing their spending on those platforms in recent months, while Walmart and Target have warned that excess inventory will impact their earnings this year.

Wood’s view of the current state of the US economy differs from that of Federal Reserve Chairman Jerome Powell, who said last month that he saw no signs of the economy entering a recession. But Wood said Powell and the Fed mostly focus on lagging indicators, such as the labor market and inflationary readings such as the CPI.

This means that the Fed likely won’t admit that the economy is in a recession until it actually happens.

Wood is instead focusing on leading economic indicators to support her view that the economy is set for further weakness and that inflationary pressures are about to end.

“If you look at the initial unemployment insurance claims, they are up 50% from the low. So I think we are going to see some big disappointment in the employment numbers going forward,” Wood said. In addition, gold prices peaked in 2020, an important measure of inflation, and copper prices fell significantly, a closely watched measure of economic activity.

“These are all indications that inflation is going to go down, and it’s going to go down significantly,” Wood said. “And we’re likely to see some deflation.”

This environment could set the leading Ark Invest fund for a decent recovery in the future, according to Wood, who said her fund has bottomed.

“Usually, growth stocks will outperform as we approach the end of a bear market and the end of a recession because they represent the new leadership,” Wood said. “It looks like we hit bottom on a daily basis based on our main strategy on May 12th.”

The bottom in the main Ark fund came about one month before the Nasdaq 100 and S&P 500 both hit their lowest levels so far this year.

“That’s an early sign that we might be turning the corner here,” Wood said. This will be good news for investors at Ark Invest, given that their main fund is down about 70% from its February 2021 high.

But Wood may not be out of danger yet, as some of its major holdings like Roku, Teladoc and Coinbase saw big drops last week due to earnings and an SEC investigation.

Leave a Reply

%d bloggers like this: