It’s no secret that Cathie Wood disagrees with the Fed’s approach toward monetary policy. She’s argued that the more significant risk to the U.S. economy (and the globe) is not rapidly rising inflation but actually deflation.
Today, she released an open letter to the Federal Reserve, doubling down on that view and sharing some stats to support it. 💌
Given how controversial a figure she’s become, it’s hard for many people to look at her views objectively. But could we put aside her investment returns (both good and bad) and consider that she may actually be onto something? Looking at today’s post, the data she’s referencing is not far from what many strategists are also speaking about.
The Fed is, in fact, looking through a rearview mirror as it drives full speed ahead. Meanwhile, many leading employment and headline inflation indicators are falling in real time.
Commodity prices have come down significantly. Retailers have excess inventory instead of shortages. Shipping rates have fallen, and used car/home prices are beginning to fall. The JOLTs data showed that job openings fell the most on record. And on and on…
The point is that the economic picture we’re all viewing by looking through the windshield is different than the one the Fed uses to make its policy decisions. Just as it was too slow to act in getting ahead of inflation, it’s now failing to give its rate hikes enough time to work through the system before continuing. That’s creating economic (and long-term deflationary) risk.
Whether you like Cathie Wood or not. You have to admit she’s got a point. 🤷
Moving on, we’ve got Jamie Dimon warned that the U.S. and global economy would likely tip into recession within 6-9 months. Additionally, he noted that stocks could fall another 20% from here.
Among the reasons for his caution, he cited the impact of runaway inflation, interest rates going up more than expected, the unknown effects of quantitative easing, and Russia’s war in Ukraine.
These are all things we’re hearing from most companies. And given how “cautious” Dimon has been for the last year or so, it’s unsurprising to hear these types of comments from him.
We’re more interested in the commentary from JPMorgan Chase and other bank stocks when they kick off earnings season on Friday. 📆
Last, but not least, we need to mention Ben Bernanke.
The Former Fed Chairman, along with Douglas Diamond and Philip Dybvig, won the Nobel Economics Prize for laying the foundation of how world powers now tackle global crises like the recent pandemic of the Great Recession of 2008. 🏆
Bernanke was at the center of the government bailouts during the Great Financial Crisis of 2008-2009, which was controversial in and of itself. As a result, the internet was abuzz with positive and negative reactions to today’s news.
As always, whether you agree or disagree with something, at least can all share the memes that come out of it. 😂