Cathie Wood has written an open letter to the US Federal Reserve (Fed) accusing it of ignoring future deflation.
ARK Investment Management’s founder said the central bank is using incorrect economic indicators when determining future economic risk.
Rather than looking at employment and price indexes from previous months, the Fed should look at commodity prices, which would suggest the biggest risk is deflation.
“The Fed seems focused on two variables that, in our view, are lagging indicators –– downstream inflation and employment ––both of which have been sending conflicting signals and should be calling into question the Fed’s unanimous call for higher interest rates,” Wood said in the letter posted on the firm’s website.
In the US, the consumer price and personal consumption expenditures both show inflation running high, while payroll growth remained strong, although slowing down.
But Wood, whose firm manages some US$14.4bn in funds, said falling prices for items such as lumber, copper and housing are telling a different story.
Lumber is down by nearly 66% since highs in March, while copper is down 30%.
Wood is renowned for being a big backer of Tesla, purchasing US$32mln worth of shares in the electric vehicle manufacturer after a sell-off following worse-than-expected delivery numbers last week.
The 66-year-old has also been a vocal supporter of crypto, although her ARK Invest fund sold US$77mln worth of shares in crypto exchange Coinbase in July.
Her ARK Innovation Exchange Traded Fund, the largest holding of which is Tesla, is down 60% in the year so far.