Inflation’s Down, but Don’t Get Too Comfy Yet | The Daily Peel | 11/15/22

• Gen-Z'ers in their early 20s are sitting on the sidelines of the labor market
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Queen Cathie’s Ready for a Roaring 2020s

A tweetstorm from beleaguered ARK founder Cathie Wood that suggested we could be headed for a Gatsby-style Roaring Twenties had Twitter buzzing over the weekend.

The crux of her thesis is that slowing inflation will reignite investment in revolutionary tech that can propel the U.S. into a broad-based growth period.

Not everyone’s inhaling her hopium.

• Cathie’s been railing on the Fed for hiking rates too quickly, which has pummeled the growth stocks that made her famous
• She’s maintained that natural deflationary forces—such as the proliferation of AI and other disruptions—will be enough to squelch inflation
• Inflation was raging after WW1/Spanish Flu in 1920, but surprisingly fell off a cliff in 1921, which ignited an economic explosion
• On the other hand, if the Fed continues cranking rates higher, she thinks the economy could spiral into a depression

Cathie’s never been one to hold back on hot takes, so this shouldn’t come as a surprise. But predicting either a historic expansion or implosion of the economy simply based on the Fed’s moves feels excessive.

We have to keep in mind that she’s talking about her book a bit here, also. Tapping the brakes on rate hikes would be great for growth stocks and, therefore, ARK, whose flagship fund is down 60% on the year.

She’s not wrong that JPow and his cronies have to keep deflationary forces in mind, but the Fed has kept a united front in prioritizing halting inflation over short-term economic health. The sudden pivot she’s suggesting seems pretty far-fetched.

Source

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