“ARK Invest CEO Cathie Wood warns of overtightening by the Fed, deeming deflation the bigger risk now”

Cathie Wood, CEO of ARK Invest, has stated that deflation is now the greater risk due to the Federal Reserve overtightening. Wood’s comments have sparked discussions and debate among investors and analysts.

JUST IN:

*ARK INVEST CEO CATHIE WOOD SAYS DEFLATION IS NOW THE ‘GREATER RISK’ BECAUSE THE FED OVERTIGHTENED

THOUGHTS? DO YOU AGREE WITH HER? pic.twitter.com/N8lAv3VKqv

— Investing.com (@Investingcom) November 27, 2023

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Deflation has become a major concern for investors and economists alike, as Ark Invest CEO Cathie Wood recently stated that it now poses a greater risk due to the Federal Reserve’s over-tightening policies. This statement has sparked a lot of debate and discussion among financial experts, with some agreeing with Wood’s assessment and others expressing their skepticism.

Wood’s assertion comes at a time when the global economy is grappling with the aftermath of the COVID-19 pandemic. Central banks around the world, including the Federal Reserve, implemented unprecedented monetary stimulus measures to counter the economic fallout caused by the pandemic. These measures included slashing interest rates and injecting liquidity into financial markets.

However, as the global economy shows signs of recovery, central banks are now facing the difficult task of unwinding these stimulus measures without causing excessive inflation. The fear is that if they withdraw support too quickly, it could lead to a deflationary spiral, where falling prices and reduced consumer spending further dampen economic growth.

Wood argues that the Federal Reserve has over-tightened monetary policy in response to rising inflation concerns. This has resulted in higher interest rates and reduced liquidity, which could potentially lead to deflationary pressures. She believes that deflation is now a greater risk than inflation and that the Federal Reserve needs to reevaluate its approach to monetary policy.

There are several factors that support Wood’s view. First, she points to the recent slowdown in global economic growth, particularly in sectors such as manufacturing and retail. This slowdown, coupled with rising input costs and supply chain disruptions, could lead to downward pressure on prices.

Second, Wood highlights the potential impact of slowing population growth and aging demographics on consumer spending. As the population ages, individuals tend to spend less, which can contribute to deflationary pressures. This is particularly relevant for countries like Japan, where an aging population has led to years of deflation.

However, not everyone agrees with Wood’s assessment. Some economists argue that the risk of deflation is overstated and that the current inflationary pressures are transitory. They believe that as supply chain disruptions ease and the global economy rebounds, inflation will moderate naturally.

Furthermore, they argue that the Federal Reserve’s tightening policies are necessary to prevent excessive inflation and asset bubbles. They believe that maintaining price stability and financial stability should be the central bank’s primary objectives, even if it means temporarily slowing down economic growth.

In conclusion, Cathie Wood’s assertion that deflation is now the greater risk due to the Federal Reserve’s over-tightening has sparked a lively debate among experts. While there are valid arguments on both sides, only time will tell whether deflation or inflation will pose a greater risk to the global economy. As always, investors should stay informed, diversify their portfolios, and adapt their strategies to changing market conditions..

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@Investingcom said JUST IN: *ARK INVEST CEO CATHIE WOOD SAYS DEFLATION IS NOW THE ‘GREATER RISK’ BECAUSE THE FED OVERTIGHTENED THOUGHTS? DO YOU AGREE WITH HER?