Star stock picker Cathie Wood, whose $7.1 billion ARK Innovation Fund has been crushed by inflation and interest rate hikes this year, said in a webinar Tuesday that the Federal Reserve will soon be forced to slow its aggressive pace of interest rate hikes as market volatility rises.
The Fed is widely expected to increase benchmark rates by 75 basis points at its meeting that ends Nov. 2, continuing the swiftest increase in rates since the 1970s.
“We do believe the Fed will get more strong signals that it has gone too far too fast,” Wood said. “We believe we are close to the end of this tightening cycle and close to a pivot in rhetoric but perhaps also a pivot in interest rate themselves.”
Wood, whose flagship ARK Innovation fund is down 61% for the year to date, has been particularly hard hit by the rise in interest rates this year because they diminish the value of future profits of the sort of speculative, unprofitable companies that make up the bulk of her portfolio.
Exact Sciences Corp, the fourth largest company in her portfolio, is down 58% for the year to date, while streaming company Roku Inc, the fund’s third-largest position, is down 77% over the same time.
Wood reiterated her view Tuesday that deflation - rather than inflation - will prove to be the more important force in financial markets over the next several years and that the Fed’s pace of interest rate hikes will damage the global economy.
“We think there will be more ramifications from this sledgehammer approach,” she said.
ARK Innovation fell 0.9% in afternoon trading Tuesday while the benchmark S&P 500 rose 0.3%.
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