Cathie Wood with sharp criticism of the US Federal Reserve – What the investor accuses the Fed of

• Cathie Wood sees extreme risks from Fed policy
• Warning signals from the bond market
• Is the Fed risking a recession?

Catherine Wood, founder of investment company ARK Invest, took on the US Federal Reserve on Twitter. The monetary authorities had to take a lot of criticism from the star investor.

Rate hikes as a mistake

In a series of posts on Twitter, Wood warned the Fed against raising interest rates in the current climate. The yield curve – measured by the difference between 10-year and 2-year government bond yields – has recently inverted. “This suggests that the Fed will raise interest rates if growth and/or inflation turns out to be lower than expected – which will prove to be a mistake,” the ARK chief wrote on Twitter.

Yesterday, the yield curve – as measured by the difference between the 10 year Treasury and 2 year Treasury yields – inverted, suggesting that the Fed is going to raise interest rates as growth and/or inflation surprise on the low side of expectations…which will be a mistake. https://t.co/5QNZeDWTn4

– Cathie Wood (@CathieDWood) April 2, 2022

Is the Fed stalling the economy?

Indirectly, Wood accuses the Fed of choking off the US economy with a cycle of interest rate hikes and also refers to economic developments. The US consumer confidence determined by the University of Michigan is lower today than at the beginning of the Corona crisis. It is at the level of 2008/2009 and not far from the all-time lows of the 1980s when both inflation and interest rates were in double digits.

US consumer sentiment, as measured by the University of Michigan, is lower today than it was at the depths of the coronavirus crisis. It has entered 2008-09 territory and is not far from the all time lows in the 80’s when inflation and interest rates hit double digits.

– Cathie Wood (@CathieDWood) April 2, 2022

In each of these periods, a recession was the result. And the situation in Europe and China is currently quite difficult. “The Fed is playing with fire,” Wood continued on Twitter.

The economy succumbed to recession in each of those periods. Europe and China also are in difficult straits. The Fed seems to be playing with fire.

– Cathie Wood (@CathieDWood) April 2, 2022

US Federal Reserve prepares markets for faster rate hikes

For the central bankers themselves, the only way to combat inflation seems to be to raise interest rates significantly and quickly. The head of the US Federal Reserve, Jerome Powell, recently even brought up the possibility of faster increases in the key interest rate in view of the “much too high” inflation rate. “We will take the necessary steps to guarantee a return to price stability,” Powell said. “The job market is very strong and inflation is way too high,” Powell said.

In fact, it is the robust US labor market in particular that has many experts insisting that the US economy is showing stability and can cope with further hikes in key interest rates without slipping into recession. In addition, a robust labor market entails the risk of a wage-price spiral, which is likely to cause the inflation rate to rise further.

Other experts, meanwhile, tend to support Cathie Wood in their assessment. “We no longer see the Fed achieving a soft landing. Instead, we assume that more aggressive monetary tightening will push the economy into recession,” Deutsche Bank’s Matthew Luzzetti told CNN Business in a recent interview. According to the financial house, a stock market crash of 20 percent and a recession in the summer of 2022 are likely due to the serious combination of geopolitical events and the massive tightening of US monetary policy. Mark Zandi, chief economist at Moody’s Analytics, and JPMorgan CEO Jamie Dimon recently made similar judgments. The latter recently warned of a “dramatic rise” in recession risks.

Editorial office finanzen.net

Image credits: Cindy Ord/Getty Images for Bloomberg Businessweek, tlegend / Shutterstock.com