Cathie Wood has weighed in on the debate on whether the United States economy is in a recession or not and her verdict backs the recession claim. In an interview with Bloomberg TV, the fund manager said that she and her team at ARK Invest believe that the US has entered a recession. “We believe we are in a recession. Two consecutive quarters of real GDP decline is the beginning of that definition,” Cathie Wood said. Although Wood has painted a grim picture, she added that the US economy could also be turning the page and heading out of a recession as soon as next year.
US economy weak
While many have argued that the US employment numbers do not hint at a recession even though the GDP has declined for two consecutive quarters, Cathie Wood disagrees. “We are getting all kinds of signals that the economy is very weak. I know a lot of people are focusing on last week’s big employment gain and non-farm payroll. But if you look at household employment, a much broader survey, that has been flat to down in the last 4 months,” she said. The nonfarm payrolls in the US increased by 528,000 jobs last month, the Labor Department said in its closely watched employment report last Friday.
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Wood also highlighted that there have been talks of layoffs all around. In the US, employers announced 32,517 job cuts in June, an increase of 58.8% from the same month last year, according to the Challenger survey. Wood added that unemployment claims have never seen a faster increase off the bottom than the recent jump.
US Federal Reserve Chair Jerome Powell and US President Joe Biden have both taken shelter behind the US jobs data as they continue to decline the possibility of the US economy being in a recession.
Out of recession in 2023
Although Cathie Wood believes the US economy is in a recession she added that the story could change next year. While most economists say that the inverted yield curve points to a recession maybe next year, we believe we will be coming out of recession next year,” Wood said. She believes the US Federal Reserve will have to cut rates next year to help the economy.
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Despite sounding the alarm bell on the economy, Cathie Wood said her ARK ETFs would stay fully invested. Wood added that the innovation theme that ARK follows would do well in tough times as it solves problems. “Will stay 100% invested in innovation. That’s who we are this is what we came to do. We think innovation is a critical allocation as the world moves rapidly,” she added.