• Fed tightens interest rates to combat inflation
• Cathie Wood already sees the causes of inflation as declining
• ARK Invest buys tech stocks on a large scale
Inflation in the US is still at a high level. The rate in August was 8.3 percent. Although that was already lower than in July, it is still a long way from the 2 percent target that the US Federal Reserve has set as a medium-term target. In order to achieve this, the currency watchdogs have already taken measures. The key interest rate has already been raised four times this year. The fact that another increase is imminent is considered a foregone conclusion on the market. Another big step of 75 basis points is assumed. But even an increase of 1 percent does not seem impossible.
ARK Invest boss Cathie Wood calls rate hikes ‘mistake’
ARK Invest founder Cathie Wood is observing this with concern. In her view, the Fed is making a big mistake by continuing to raise interest rates, according to Reuters. The causes of inflation, which shot to a new 40-year high in May, are already weakening. The star investor interprets the falling raw material prices and freight costs as well as stable gold prices as a sign that the supply bottlenecks that have contributed to the high inflation are slowly easing. In addition, the US economy would be on the way to a recession, which would also reduce price pressure. Because of this, Wood sees more of the problem of an upcoming one deflation.
ARK Invest’s flagship ETF in reverse
However, it should come as no surprise that the investor is not a big advocate of high interest rates. After all, the investment vehicle ARK Invest with the various ETFs primarily focuses on companies from the tech industry, which suffer particularly from rising interest rates due to their higher borrowing requirements. In addition, as they tend to be riskier investments, they are avoided in times of weakness on the stock exchanges. This can also be seen in the performance of Cathie Wood’s flagship ETF, the ARK Innovation ETF. This has lost more than 50 percent of its value since the beginning of the year.
Cathie Wood continues to bet big on tech
However, this does not stop the star investor from continuing to bet on the tech sector on a large scale. Cathie Wood recently bought into 27 companies during last week’s market selloff, with the largest investment being in video streaming platform Roku. In total, ARK Invest spent $41.9 million on tech stocks as of the reporting date. In addition to Roku, other beneficiaries included Zoom, NVIDIA, Draftkings, and Twilio. To finance the shopping spree, however, the investment company parted with Signify Health papers worth USD 45 million, among other things.
As Wood told Reuters, she believes “disruptive innovation stocks” currently have a market cap of $8 trillion. In the next eight to ten years, however, this is likely to increase to 200 trillion US dollars.
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