Cathie Wood says Fed hiking interest rates would be a mistake

Cathie Wood, the founder of Ark Investment Management, said any decision by the Federal Reserve to raise interest rates as the yield curve inverts would be a mistake.

U.S. government bond yields reached new levels of inversion Friday after a solid jobs report bolstered bets that the central bank will increase the size of its next rate hike. The two-year rate exceeded the 30-year for first time since 2007, while other parts of the curve, including the five-year and 30-year segment, already inverted.

The Fed seems to be “playing with fire,” she wrote in a series of tweets on Saturday.

Yesterday, the yield curve – as measured by the difference between the 10 year Treasury and 2 year Treasury yields – inverted, suggesting that the Fed is going to raise interest rates as growth and/or inflation surprise on the low side of expectations…which will be a mistake. https://t.co/5QNZeDWTn4
— Cathie Wood (@CathieDWood) April 2, 2022

Economists have learned over many cycles that the 10-2 year measure of the yield curve leads another one: the difference between the 10 year Treasury yield and the 3 month Treasury rate. I have no idea why many strategists and economists are reverting to the latter one now.
— Cathie Wood (@CathieDWood) April 2, 2022

US consumer sentiment, as measured by the University of Michigan, is lower today than it was at the depths of the coronavirus crisis. It has entered 2008-09 territory and is not far from the all time lows in the 80’s when inflation and interest rates hit double digits.
— Cathie Wood (@CathieDWood) April 2, 2022

The economy succumbed to recession in each of those periods. Europe and China also are in difficult straits. The Fed seems to be playing with fire.
— Cathie Wood (@CathieDWood) April 2, 2022

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