Source: Zhitong Finance and Economics
Author: Ma Huomin
Casey Wood, the "wooden sister", believes that Jerome Powell and the Fed have misjudged the inflation outlook by raising interest rates so aggressively.
"Powell is using Volcker's sledgehammer and I think he made a mistake," Wood wrote on Twitter. "
"the Fed's monetary policy decisions are based on lagging indicators: employment and core inflation," Mr Wood said. Leading inflation indicators such as gold and copper indicate the risk of deflation. Even oil prices have fallen more than 35% from their peak, erasing most of this year's gains. "
The Federal Reserve is due to hold an interest rate meeting on September 21, and the market now believes that the probability of the Fed raising interest rates by 75 basis points is 82%, while the probability of raising interest rates by 50 basis points is 18%.
Just a month ago, the market predicted a 68 per cent chance of raising interest rates by 75 basis points. Powell's hawkish remarks at Jackson Hole's annual meeting raised market expectations of a radical Fed rate hike.
While Wood may think the Fed is making a mistake, Seeking Alpha writer Rida Morwa stressed that a rate hike is coming and will not stop until the Fed thinks it has beat inflation.
In addition, Wood's flagship fund, Ark Innovation ETF (ARKK.US), has tumbled 55 per cent so far this year. In August, Ark Innovation ETF suffered outflows of more than $800m, the largest monthly outflow from the fund since September.
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