ARK exchange-traded funds (ETFs) and Cathie Wood are in focus after Wood revealed that she believes that the U.S. is already in a recession. On CNBC, Wood stated that the amount of inventory that companies currently have on hand are the most she’s seen in her 45-year career. The ARK CEO believes that this is a significant problem. Meanwhile, ARK’s flagship fund, the Ark Innovation ETF (NYSEARCA:ARKK), has declined by over 50% since the start of the year.
Wood went on to explain that her temporary inflation thesis was wrong. She was also surprised that supply chain challenges have persisted for about two years now. Still, Wood notes that inflation will “set us up for deflation.”
Meanwhile, the Consumer Price Index (CPI) increased by 8.6% year-over-year in May, representing the largest increase in over 40 years.
Cathie Wood Believes the U.S. Is Already in a Recession
Consumers are feeling the effects of inflation as well. The University of Michigan’s Consumer Sentiment Survey fell to 50 in June, down 14.4% from the previous month. June’s sentiment figure is the lowest reading of all time, comparable to the readings of the 1980 recession.
In a tweet, Wood added that she believes the U.S. entered into a recession during the first quarter. Due to high levels of inventory, gross domestic product (GDP) may be bloated for the second quarter. These bloated levels may subsequently unravel during the following quarters. If this happens, these factors could detrimentally affect “growth” companies for the rest of the year.
Furthermore, geopolitical tensions have pushed gas prices to unexpectedly high levels. However, Wood notes that this may ultimately help electric vehicles (EVs) gain greater acceptance. She adds that “the shift to EVs will undermine oil prices.”
Still, there is a silver lining, at least for Cathie Wood. ARKK has received over $180 million in inflows this month, suggesting that investors are confident in her approach.
In a statement made last December, Wood explained:
In our view, fears of inflation will give way to confusion and fears of recession during the next three to six months. If so, the rapid growth rates of truly innovative companies, many of their equities maligned this year, should be rewarded handsomely.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.