Cathie Wood, CEO of Ark Invest, stated on Tuesday that the United States is already in an economic slowdown, and she conceded that she overestimated the severity and long-term impact of inflation.
“We think we are in a recession,” Wood said on CNBC’s “Squawk Box” Tuesday. “We think a big problem out there is inventories… the increase of which I’ve never seen this large in my career. I’ve been around for 45 years.”
According to the innovation-focused investor, inflation has been hotter than predicted due to supply chain disruptions and geopolitical threats.
“We were wrong on one thing and that was inflation being as sustained as it has been,” Wood said. “Supply chain … Can’t believe it’s taking more than two years and Russia’s invasion of Ukraine of course we couldn’t have seen that. Inflation has been a bigger problem but it has set us up for deflation.”
In May, the consumer price index climbed 8.6 percent year on year, the biggest increase since December 1981.
Consumers are experiencing the effects of quick price hikes, according to Wood, as evidenced by sentiment data that has dropped to historic lows. She cited the University of Michigan’s Consumer Surveys, which revealed a reading of 50 in June, the lowest number ever.
The popular investor has had a difficult 2022, as her disruptive technology darlings have been among the greatest losers this year as interest rates rise. Her flagship active fund, Ark Innovation ETF, is down 52 percent year to date and down 66 percent from its all-time high reached in February 2021.
Nonetheless, Wood claims that her clients are generally sticking with her, and that fresh money is flooding in as investors seek diversification in a down market. According to FactSet, ARKK received more than $180 million in inflows in June.
“I think the inflows are happening because our clients have been diversifying away from broad-based bench marks like the Nasdaq 100,” Wood said. “We are dedicated completely to disruptive innovation. Innovation solves problems.”
(Adapted from CNBC.com)