The panic that struck the U.S. banking system this month was no surprise for Cathie Wood.
Since last year, the founder and CEO of fund management firm ARK Invest, has been warning that the Federal Reserve’s aggressive series of interest-rate increases might break the financial system and could lead the U.S. economy to deflation.
Wood’s comments now appear particularly prescient, after the collapse of Silicon Valley Bank triggered widespread turmoil in the stock and bond markets this month. Now many Wall Street analysts and economists are questioning whether the Fed has tightened monetary policy too much—or too quickly—in its fight against inflation. Investors and regulators are scrutinizing just how resilient the banking system is in the face of higher rates.
In a recent conversation with Barron’s, Wood says the Fed’s rate hikes have already gone too far, and, as a result, there are more troubling signs that the economy could be headed toward recession and even possibly deflation.
Wood’s ARK funds gained prominence in 2020 as their holdings of innovation- and growth-driven stocks skyrocketed during the pandemic-triggered rally. Her flagship
ARK Innovation
exchange-traded fund (ticker: ARKK) returned a whopping 152% that year. Wood was named to the list of Barron’s 100 Most Influential Women in U.S. Finance in 2023.
While ARK’s portfolios have suffered deep losses in the past two years, Wood tells Barron’s she isn’t giving up on growth and tech stocks—or crypto—despite the tough macroeconomic environment and hawkish central bank policies that are dragging on these investments.
However, the climb in interest rates that has battered tech stocks is still going. On Wednesday, the Fed raised its target for the federal-funds rate from 4.75% to 5%, marking the ninth increase in about a year. After the decision, Fed Chair Jerome Powell emphasized that the broader financial system was “sound and resilient.” But stocks continued to tumble and Treasuries rallied, signaling a lack of…
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