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Ark Invest's Cathie Wood says markets are wrong to fear inflation and the bursting of the tech bubble

Jennifer Sor   

Ark Invest's Cathie Wood says markets are wrong to fear inflation and the bursting of the tech bubble
  • Investors are wrong to fear high inflation and rising rates, according to Ark Invest's Cathie Wood.
  • Wood has said deflation is a bigger problem, as prices are steadily falling.

Markets are wrong to fear rising inflation and the bursting of the tech bubble, according to Cathie Wood.

In an interview with CNBC this week, the Ark Invest founder said she had never seen markets "this dislocated," referring to the recent sell-off in stocks as investors prepare themselves for additional rate hikes from the Federal Reserve. On Friday, the S&P 500 finished off its worst week of 2023 as the Personal Consumption Expenditures index, the Fed's preferred inflation measure, jumped 0.6% last month, higher than economists' expectations.

Central bankers have been battling inflation and have raised interest rates 450 basis-points to cool down the economy, a move that sent the S&P 500 down 20% last year. Fed officials have warned more rate hikes are coming in 2023. An overly aggressive Fed could spark a recession, Wall Street commentators have been warning in recent months.

But it's wrong to fear inflation and higher rates, Woods said, pointing to the steady decline in inflation from the highs of 2022, when price jumped at the fastest pace in 41 years.

"We do think inflation is coming down now. It always seems like it could come down faster, but we do believe it's on its way down," she added. "This reminds me of early in my career in the early 80s. It was the same thing, but those who bet on lower inflation and interest rates long term were the winners."

Wood has been bullish on the economy despite ominous warnings from other Wall Street commentators. Last year, she said deflation was becoming a bigger problem than inflation, and has gone on multiple tech and growth stock buying sprees in 2023 as the market rebounded.

While investors have fled high growth tech names amid the Fed's rate hike cycle, the moment is not reminiscent of the dot-com bubble, Wood argued. She noted that most of the innovations driving the market have been developed after 2001, where costs are now lower and products are more advanced.

"If we're right, the benchmarks, which represent the traditional world order, are going to be disintermediated, disrupted, by the most massive innovation period in history," she said, expressing her bullishness on the sector.


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