- Investors are wrong to fear high inflation and rising rates, according to Ark Invest’s Cathie Wood.
- Wood said deflation is a bigger problem, as prices have been falling steadily.
- While investors are skeptical of the boom in tech stocks, Woods said it’s not a repeat of the dot-com era.
Markets are wrong to fear rising inflation and bursting the tech bubble, says Cathie Wood.
In an interview with CNBC this week, the founder of Ark Invest said she had never seen markets “this displaced,” referring to the recent selloff in stocks as investors braced for further rate hikes from the Federal Reserve. On Friday, the S&P 500 ended its worst week of 2023 as the Personal Consumption Expenditure index, the Fed’s favorite measure of inflation, jumped 0.6% last month, exceeding economists’ expectations.
Central bankers are fighting inflation and have raised interest rates by 450 basis points to cool the economy, sending the S&P 500 down 20% last year. Fed officials have warned that more rate hikes are coming in 2023. An overly aggressive FED could trigger a recession, Wall Street commentators have warned in recent months.
But it’s wrong to fear inflation and higher rates, Woods said, pointing to the steady decline in inflation since the 2022 highs, when prices jumped at the fastest pace in 41 years.
“We think inflation is coming down now. It always seems like it could come down faster, but we believe it’s on its way down,” she said. “This reminds me early in my career in the early 80s. It was the same thing, but those who bet on lower inflation and long-term interest rates were the winners.”
Wood was bullish on the economy despite ominous warnings from other Wall Street commentators. Last year, she said deflation was becoming more of a problem than inflation, and went on a multi-buy spree of technology and growth stocks in 2023 as the market recovered.
While investors have fled high-growth tech names amid the Fed’s rate-hike cycle, the dot-com bubble isn’t top of mind at the moment, Wood argued. She noted that most of the innovations driving the market were developed after 2001, where costs are now lower and products are more advanced.
“If we are right, the benchmarks, which show the traditional, de-intermediate world order, will be disrupted, by the most massive period of innovation in history,” she said, pointing out that she bullish on the sector.