Cathie Wood says Jerome Powell should put away Paul Volcker’s sledgehammer

Jerome Powell, chairman of the US Federal Reserve, from right, Lael Brainard, vice chair of the board of governors for the Federal Reserve System, and John Williams, president and chief executive officer of the Federal Reserve Bank of New York, during a break at the Jackson Hole economic symposium in Moran, Wyoming, US, on Friday, Aug. 26, 2022.

Bloomberg

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Fed Chair Jerome Powell may have name-dropped famed inflation fighter Paul Volcker twice in his pivotal Jackson Hole address. But there’s a critical difference between the two Fed chiefs, says fund manager Cathie Wood.

Wood, who runs ARK’s family of technology-focused ETFs, said Powell is inappropriately wielding what she called Volcker’s sledgehammer.

In a series of tweets, Wood pointed out the Fed didn’t react to inflation in a decisive way until 15 years after the Vietnam War and Great Society began.

Consumers and businesses had 10 to 15 years to react to inflation. In contrast, they are now “in shock” as the Fed hikes rates, with housing unraveling.

She pointed to commodity markets as indicators that inflation is turning into deflation. Gold peaked more than two years ago, lumber prices have dropped more than 60%, DRAM memory chip prices have fallen 46% and crude oil has lost 35%, she said. Retailers, she adds, are “swimming in inventories.”

Wood said she wouldn’t be surprised to see a “significant policy pivot” in the next three to six months.

Wood’s flagship innovation fund ARKK, +4.11% has skidded 56% this year, versus the 25% drop for the Nasdaq Composite COMP, +2.14% and 17% decline for the S&P 500 SPX, +1.66%.