Cathie Wood says the Fed will cut rates in 2023 as a number of signals point to a 'very weak' economy

  • Tech investor Cathie Wood sees the Fed cutting interest rates in 2023, she told Bloomberg on Monday.
  • There are signs the US economy is ‘very weak,’ including a rise in layoff notices and claims for unemployment benefits, she said. 
  • The Fed looks on track to interest raise rates again in September after four rate hikes so far in 2022. 

The Federal Reserve will reverse course on interest-rate policy next year by yanking down borrowing rates in the face of weaker activity in the US economy, tech investor Cathie Wood told Bloomberg TV.

“We’re getting all kinds of signals that the economy is very weak,” which will prompt the Fed to start rate cuts in 2023, she said Monday.

She acknowledged her observations come after last week’s unexpectedly strong US jobs report for July. The economy added 528,000 nonfarm payroll jobs, outstripping the 250,000 consensus estimate from Bloomberg. 

Stocks have largely slipped since Friday’s data as the report reinforced the view that the Fed sees the economy able to withstand more rate increases as it works to yank down inflation from four-decade highs. The Fed has kicked up the fed funds rate four times this year to a range of 2.25% to 2.5%. 

“But if you look at household employment – which is a much broader base survey of employment – that has been flat to down for the last four months,” said Wood, whose flagship Ark Innovation ETF invests in disruptive tech companies. “If you look at [unemployment] claims, we’ve never seen a faster increase off the bottom than we’ve just seen … up roughly 50% from the lows.” 

Initial claims for unemployment benefits rose by 6,000 to 260,000 in the week ended July 30, government data showed last week

Wood also noted an increase in layoffs as tracked by job placement firm Challenger, Gray and Christmas. Its June report said job cuts had jumped 57% from May and logged the highest quarterly total since the first quarter of 2021. Its July report said job cuts fell 21% from June but were up 36% from a year earlier. 

“I think this is all related to inventories,” Wood said. “We have a massive inventory glut,” and companies are welcoming new hires after a long-running shortage of labor. The Fed, meanwhile, will be looking toward unwinding rate hikes, she said. 

The next inflation report is due Wednesday. An Econoday consensus estimate puts July headline inflation at 8.7%, cooling from 9.1% in June. A recent, preliminary second-quarter report on US gross domestic product showed economic activity shrank by 0.9%.  The economy had appeared on track for a technical recession as it contracted by 1.6% in the first quarter. 

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