U.S. inflation fell less than market expectations overnight, sending U.S. stocks their biggest one-day drop in more than two years. As many technology stocks dived sharply, Cathie Wood, the head of Ark Investments, who has been betting heavily on technology stocks, was also “severely injured.”
Later, Wood warned that the Fed’s move to raise interest rates to curb high inflation was a mistake. Although the Fed is widely expected to accelerate interest rate hikes to fight inflation, Wood believes that the Fed may make the mistake of “excessive rate hikes” and that deflation should be more worrying now.
Despite the poor performance of his managed funds this year, Wood continued to increase his holdings of technology stocks on Tuesday, showing his confidence in the prospect of cooling U.S. inflation.
Take an unusual step? Wood firmly believes the Fed should not raise rates
Data released on Tuesday showed that the U.S. consumer price index unexpectedly rose month-on-month in August, which pushed the CPI year-on-year increase in August to 8.3%, higher than market expectations. This means that inflation pressures in the US appear to be greater than expected, and the pressure on the Fed to raise interest rates has also increased.
After the release of the data, the three major U.S. stock indexes tumbled and U.S. bond yields soared. As of the close, the Dow fell 3.94%, the Nasdaq fell 5.16%, and the S&P 500 fell 4.32%, the largest single-day decline in more than two years.
The market currently expects that the possibility of the Fed raising interest rates by at least 75 basis points at the September meeting has reached 100%, and there are even concerns that the Fed may raise interest rates by 100 basis points.
But Wood remains adamant that U.S. commodity prices and freight rates are falling and gold prices are holding steady, suggesting that supply chain issues that are key to pushing U.S. inflation to a 40-year high this year are easing.
At the same time, Wood predicts that the U.S. economy could slip into a recession, which will further reduce price pressures.
With firm expectations that inflation will cool, Wood believes the Fed’s move to raise interest rates “will prove to be a mistake.”
“Still firm in the face of heavy losses” to buy the bottom?
Ark is sticking to expectations that the market value of the global “disruptive innovation” stocks they see will grow to $200 trillion in the next eight to 10 years – even though they are currently worth only $200 trillion in this year’s tech rout. for $8 trillion.
Although the ideal is lofty, the fund managed by Wood has also been greatly affected recently due to the recent decline in technology stocks.
When U.S. stocks plummeted on Tuesday, Wood’s flagship fund ARK Innovation Fund (ARKK) fell 6.8%, its main holding stock cryptocurrency company Coinbase Global fell more than 8%, and the second largest holding ZOOM fell 6.21%.
ARKK’s net worth has fallen 54.4% so far this year, placing it at the bottom of the list of 597 U.S. mid-cap growth funds tracked by Morningstar.
However, despite the “bloodbath” of the fund, Wood’s confidence in the cooling of U.S. inflation is not just talk. As U.S. stocks tumbled on Tuesday, Wood’s Ark Investment Management reportedly made heavy purchases through its ETF funds.
According to reports, on Tuesday, Wood bought more than 200,000 shares of Zoom shares and more than 250,000 shares of Roku shares through ARKK, valued at about $17 million and $16 million, respectively, at closing prices.