A Financial Crisis Might Be Coming, Says Cathie Wood

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Cathie Wood
Cathie Wood

The dramatic price swings in stocks and bonds is a warning sign that the Federal Reserve could provoke a financial crisis by hiking interest rates aggressively, Ark Invest CEO Cathie Wood has said.

Stocks have declined sharply in April, and bonds have tumbled across 2022, as investors bet that the Fed will raise rates hard to slow growth and curb red-hot inflation.

The S&P 500 fell 2.8% Tuesday as investors took stock of company earnings and fretted about the economy. The benchmark US stock index was down 9.2% over the last month, as of Wednesday morning.

“Equities and bonds seem to be warning the Fed that its policy measures could cause an economic and/or financial crisis: equities are swooning and the yield curve is nearly [in] negative territory,” Wood tweeted Tuesday.

Wood’s comment came on the same day Deutsche Bank predicted a major US recession in a research note. The bank said the Fed would hike rates to above 5%, from the current level of 0.25%, to get a grip on inflation.

The Ark Invest CEO added that the recent dollar rally is a warning signal, that could impose problems on the global economy. The dollar index has soared 7.44% in 2022 to 103.10, as of Wednesday.