The chief executive of investment firm ARK Invest thinks the U.S. Federal Reserve is about to alter its inflation strategy, which she believes will help the market rebound.
In a new company video, ARK Invest CEO Cathie Wood says that the US economy is probably in an “inventory recession” right now.
Wood says the current macro makeup is nothing like the recession of 2008/2009, and she predicts inflation will come down below the 2% level the Federal Reserve hoped for, pushing the Fed to pivot on their tight monetary policies.
“We believe there are all kinds of signals pointing to lower inflation, which suggests that the Fed should pivot soon. The most important one, perhaps, is the bond market itself. Interestingly, bond investors, who are very sensitive to inflation and try to protect themselves against it, they are saying… ‘We believe the Fed is going to pivot.’
And what’s interesting about that is markets always lead the Fed. And in this case, long-term interest rates have dropped below short-term interest rates, and yet the Fed still is saying that it is going to raise interest rates.
Long-term term interest rates are rarely below short-term interest rates unless we’re in a recession or unless inflation is going to surprise on the low side of expectations. And we think both of those are true.”
Wood goes on to say that not only will the Fed pivot, it could potentially overshoot its mark.
“The problem is we believe it will overshoot and go below that 2%, maybe even into negative territory because money supply has been falling.”
Brett Winton, ARK Invest’s chief futurist, also predicts in the same video that public blockchains and crypto assets will become “even more differentiated for their scarcity in an age of abundance.”
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Featured Image: Shutterstock/Bay.Hermawan/Natalia Siiatovskaia