Ark Invest chief Cathie Wood thinks the US is in a recession but says her fund's growth strategy has already bottomed

  • The economy is in a recession and the job market is set to slow, Ark Invest’s Cathie Wood told CNBC.
  • Wood said that the Fed is focused on lagging indicators like CPI and jobs data, as reason to why her view differs from Fed Chairman Jerome Powell.
  • Wood said her flagship growth fund is likely set for solid performance after it bottomed well before the broader market.

Ark Invest’s Cathie Wood is certain that the US economy has already entered a recession, according to an interview with CNBC on Friday.

“What we do see in these earnings results is that we are in a recession… We think this is an inventory-led recession, and I think that’s coming through loud and clear. We’re seeing advertisers cut back dramatically,” Wood said.

Recent earnings results from Snap and Meta Platforms revealed that advertisers were indeed slowing their spending on those platforms in recent months, while Walmart and Target have warned that excess inventory will drag on their profits this year.

Wood’s view of the current status of the US economy differs from Fed Chairman Jerome Powell’s view, who said last month that he isn’t seeing signs the economy has entered a recession. But Powell and the Fed are mostly focused on lagging indicators, Wood said, like the employment market and inflationary readings like CPI. 

That means the Fed likely won’t acknowledge the economy is in a recession until it’s already happened. 

Wood instead focuses on leading economic indicators to back up her view that the economy is set to weaken further and inflationary pressures are set to end.

“If you look at initial unemployment insurance claims, they’re up 50% form the low. So I do believe we’re going to see some significant disappointment in the employment numbers moving ahead,” Wood said. Additionally, gold prices peaked in 2020, which is an important gauge of inflation, and copper prices have moved considerably lower, which is a closely watched gauge of economic activity.

“All of these are signals that inflation is going to come down, it’s going to come down significantly. And we’re probably going to see some deflation,” Wood said. 

And that environment could set Ark Invest’s flagship fund up for a decent recovery going forward, according to Wood, who said that her fund has bottomed.

“Typically, growth stocks will outperform as we move towards the end of a bear market and the end of a recession because they are the new leadership,” Wood said. “It looks like we bottomed on an intraday basis based on our flagship strategy on May 12.”

The bottom in Ark’s flagship fund came about one month before the Nasdaq 100 and S&P 500 put in their lows so far this year.

“That’s an early signal that we might be turning the corner here,” Wood said. That would be welcome news for investors in Ark Invest, given that their flagship fund is down about 70% from its February 2021 high. 

But Wood may not be out of the woods yet, as some of her top holdings like Roku, Teladoc, and Coinbase saw significant declines last week due to earnings and an SEC investigation.

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