Veteran hedge fund manager and ARK invest founder Cathie Wood is calling out the US Federal Reserve in a new open letter.
In a post on ARK’s website, Wood says the Fed seems to be basing its decisions based on two variables: employment and headline inflation.
The ARK founder views both as lagging indicators, and questions the Fed’s decision to unanimously continue to raise interest rates.
Wood says commodity prices are better indicators of the future.
“Commodity prices are leading indicators, upstream in the stages of processing. Most commodity prices have peaked and, except for food and energy, are falling on a year-over-year basis, as shown below. Without question, food and energy prices are important, but we do not believe that the Fed should be fighting and exacerbating the global pain associated with a supply shock to agriculture and energy commodities caused by Russia’s invasion of Ukraine.”
Wood also argues inventory accumulation appears to be “overwhelming” manufacturers and retailers.
“In the face of single-digit sales growth, inventories at Walmart and Target increased 25.5% and 36.1%, respectively, during the most recent quarter. Nike’s recent quarterly results suggest that the inventory imbalances have worsened. Despite sales growth of only 3.6%, Nike’s inventories increased 44.2% globally. In North America and on ships in transit, its inventories increased 64.8% and 85.0%, respectively!”
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