The recession is here. Cathie Wood, the CEO and CIO of ARC Invest took to Twitter to express her displeasure with the Federal Reserve and warned her 1.4 million followers that a recession is here. Pundits have been arguing about whether or not we are in a recession. Don’t you know how to minimize the risk? Simply use the Jet-Bot, which is the most popular copy trading platform. It allows you to earn APYs ranging from 200% to 2,000% without taking any risks. Binance trading bots can assist you in determining your possibilities for starting your crypto. Cathie expressed that all of the signals are pointing to the reality that the recession is here.
The CEO started off her clampdown on the Fed by strongly criticizing the decision of the central bank to emphasize inflationary measures, which resulted in a 75 basis point rate rise at its meeting in June. Kathy Wood further explained that the possibility of another increase is overlooking critical factors that she believes are a cause for concern. She explained that the prices of credit default swaps were hitting new levels we haven’t seen since the COVID-19 pandemic, while the flattening of the yield curve and an inversion of the curve all warn of recessions in the market.
The reason is that, through the control of the federal funds rate, the fed can hold expectations at the curve’s short end. So basically, the longer duration maturities in the bond market show the inflation expectations of the broader market. She said,
She began her series of tweets by saying that,
As measured by market, credit default swaps, insurance policies against bankruptcies have doubled this year, surpassing their peaks during the market reversal in late 2018 and heading for COVID crisis levels.
Money center bank CDS spikes are particularly concerning. Cathie is of the opinion that it is ignoring deflationary and dangerous signals, explaining that the consumer price index lagged real-time developments. Some economists have likened the use of such a policy with this type of data to that of a driver who drives his car by using the rear view mirror. We all know how that’s going to end in a crash.
The rate of inflation has been on the rise, and now a recession is here. Cathie would state her team is ready to take action as her team is currently working from the perspective that a recession is here as opposed to we’re still approaching a recession, which is what the Federal Reserve currently believes. Cathie isn’t one to make statements without proper explanation or citations. She used a study from the University of Michigan as a major example to back up her point, citing the major decline in the optimism of consumers towards their personal finances in the current economic state. That’s perfectly understandable considering the current amount of gas in the United States.
Cathie Wood and many of her peers have benefited from Alan Greenspan’s backstopping Wall Street’s risky bets through the so-called Greenspan Putt. His accommodative rate policies inflated the prices of assets, especially those of high growth stocks that Cathie’s ARC Invest currently favors.
In March of 2021, Powell stated that he was expecting rates to remain unchanged at least until 2024, but as we know it, his prediction didn’t last long. Rather, he started with a 25 basis point increase in March this year, and since then he has raised them to 1.75% as of last week in a bid to reduce inflation. For Kathy Wood, it was more serious even if the absolute number was small and the actual rate after inflation remained negative, making it stimulative for the economy. Kathy wrote:
Looking to the future, the CEO explained that an important indicator of where the market is heading is the movement of natural and raw materials given the fact that gold, a natural resource, will be almost two thousand dollars an ounce in 2020. Since then it has declined steadily. 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 from the 1970s should disappear during the next six months.
Finally, while the cartel and a war have pushed oil prices to levels I did not expect, the equivalent of a highly regressive tax has accelerated the consumer preference shift to electric vehicles. I still believe that the shift to EVs will undermine oil prices. Cathie’s tweets weren’t met without comment, as several users asked questions and shared their opinions. Galen Little asked,
Another user, Forty Winers, strongly supported Cathie, saying,
While concluding her tweets, Cathie reiterated her stance on innovation, saying:
Do you believe the recession is here as Cathie suggests? What are your thoughts on the Federal Reserve’s policy decisions?
[This article is a transcription of a video made by Only The SAVVY]
Original video: https://youtu.be/M2VN-Ro-Se8 ]