Cathie Wood: The Fed will not raise interest rates as much as markets expect

The US Federal Reserve is not going to raise interest rates as much as the markets are estimating today, says ARK Cathie Wood.

The strategies of ARK Investment Management, where Wood is the founder and CEO, have faced several difficulties amid fears of inflation, he told the Seedly Personal Finance Festival in Singapore, according to Bloomberg.

The company’s flagship, ARK Innovation ETF, has fallen by 45% from the previous year to date.

Wood expects inflation to peak and then fall dramatically. Such a scenario could give the Fed the opportunity to raise interest rates less aggressively than it looks today.

There could be “a surprise in terms of interest rates that will not rise as much as the market has estimated,” Wood said.

Inflation in the US is now close to its highest level in four decades, a situation that has pushed interest rates higher by the Fed, pushing up risky assets such as stocks that Wood and ARK tend to prefer.

Wood’s funds are not the only assets that are declining. The Nasdaq 100 technology index has fallen by 18% in 2022 and the S&P 500 by 10%.

There is a growing debate in the US about whether the Fed can plan a mild landing for the US economy or whether an aggressive growth rate could hurt the job market or lead the economy into recession.

“We believe the Fed is receiving a lot of messages right now that it should not go too far,” Wood said.

As for China, Wood said: “We have reduced our exposure and we believe that many of China’s moves have been very hostile to corporate finance. “China wants to be a champion of innovation. And innovation solves problems.”

Wood is looking for companies – “winners” in the field of electric vehicles, while at the same time recommending attention to technology companies with high profit margins, because the Chinese government will probably want to reduce.