NEW YORK: The Federal Reserve (Fed) isn’t going to hike rates as much as markets are currently betting, says Cathie Wood.(pic)

       The strategies of ARK Investment Management LLC, where Wood is founder and chief executive officer, have struggled recently amid fear of inflation, she said via video to the Seedly personal finance festival in Singapore. The firm’s flagship ARK Innovation exchange-traded fund (ETF) is down 45% year-to-date.

       Wood expects the spike in inflation to end before a “dramatic decline” in prices, she said. Such a scenario might give the Fed leeway to boost rates less aggressively than is currently seen.

       There could be “a surprise in terms of interest rates not going up as much as the market has priced in,” Wood said.

       Inflation in the United States is currently around the highest level in four decades, a situation that’s helped spur the Fed to start boosting rates – thus pressuring risk assets like the stocks Wood and ARK tend to favour.

       Markets last Friday were pricing in four back-to-back half-point increases by the Fed. Late on Thursday, there were even a couple of trades anticipating multiple 75-basis-point hikes.

       Wood’s funds aren’t the only assets sagging. The tech-heavy Nasdaq 100 is down 18% in 2022, and the S&P 500 off 10%.

       There’s growing discussion about whether the Fed can engineer a soft landing for the US economy, or whether an aggressive pace of hikes could hurt the job market or tip the economy into a recession.

       “We do believe that the Fed is getting lots of messages right now that it should not tighten too much,” Wood said.

       On non-fungible tokens (NFTs), she said: “Truly disruptive innovation” accounts for US$10 trillion (RM43.25 trillion), which is less than 10% of the global equity market capitalisation. We believe that US$10 trillion will go to US$210 trillion (RM908.3 trillion) in the next eight years – that is a 40% compound annual rate of return. And we would expect that from our strategies as well, they’re very depressed right now.”

       NFTs represent the first global, immutable, digital property-rights system, she said.

       Economists such as Hernando de Soto and Thomas Sowell “will tell you the one way to pull people and countries out of poverty is property rights. And so we think this is the extension of physical property rights into the digital world”

       On a Morningstar downgrade of the ARK Innovation ETF, she said: “Morningstar is a provider of indices, and ARK does not pay attention to indices. I do not believe Morningstar understands what we’re doing –we are not looking at indices to screen for ideas for our portfolios. We are using original research to screen for our ideas.”

       “In terms of the concentration risks: this is really what Morningstar does not understand about ARK.”

       During drawdowns, “we concentrate our portfolio toward our highest-conviction names” and “when we have done this over time the results have been exceedingly good coming out of a bear market.”

       On China investment, she said: “We’ve dialled down our exposure and we do feel that many of the moves have been very hostile to capital.

       “And so it makes sense that capital is leaving China to some extent. But we also know that China wants to be a champion of innovation. And innovation solves problems.” — Bloomberg