- Ark Invest’s Cathie Wood warned that the economy could be headed for one or two negative quarters amid a “rolling recession” as worries about job security spur Americans to save money rather than spend it. But the downturn will help free the Federal Reserve to cut interest rates and set up the Trump administration to lower taxes.
Ark Invest founder and CEO Cathie Wood is bearish on the economy’s short-term prospects but expects the Federal Reserve and the Trump administration to step up soon.
In an interview with Bloomberg TV on Tuesday, she also noted she has been buying Tesla stock and crypto-related assets like Coinbase and Robinhood during the market’s downturn.
Stocks have tumbled since mid-February as investors worry that President Donald Trump’s aggressive tariffs and workforce cuts will tip the economy into a recession. Wall Street forecasters have been hiking recession odds, with some putting them around 50%.
“We think we’ve been in a rolling recession and that we are actually going to see some negative quarters here and that’s because the velocity of money is collapsing,” Wood told Bloomberg, referring to economic downturns that affect different sectors at different times.
She added that worries about job security are prompting Americans to save more of their cash and predicted one or two negative quarters. But in her view, that will set up the Trump administration for tax cuts and the Fed for rate cuts.
The day after Wood spoke, the Fed kept rates steady while central bankers lowered their growth forecasts for the year and lifted their inflation expectations amid higher tariffs.
But policymakers also largely maintained views for two rate cuts this year, and Fed Chair Jerome Powell’s generally dovish tone during his news conference assured some on Wall Street that the “Fed put” remains in play, meaning rates will fall if the economy worsens.
For her part, Wood sees two or three rate cuts this year—or perhaps even more—as inflation cools further, with prices for food, gasoline and some rents already coming down. In addition, innovation also leads to “good deflation,” contributing to a further easing of prices.
“We think the Fed is going to have many more degrees of freedom in the second half of this year than most people think,” she said. “We could see more than the number I just suggested, two to three cuts.”
Meanwhile, DoubleLine Capital CEO Jeffrey Gundlach told CNBC on Thursday that the federal government’s budget cuts will weaken economic growth and warned the chance of a recession is higher than most people believe.
“I actually think it’s higher than 50% coming in the next few quarters,” Gundlach said. “I think 50 to 60 (percent) is where I am.”
Dimmer views of the US economy and stocks, coupled with relative outperformance in once-lagging markets, have eroded the belief in so-called American exceptionalism.
Gundlach thinks it’s probably time for investors to diversify away from US assets, pointing to Europe and emerging markets.
“I think that’s going to be a long-term trend,” he said.
