Cathie Wood says the bond market is signaling the Fed is making a 'serious mistake'

ARK Invest Chief Executive Cathie Wood said on Wednesday that the bond market is signaling that the Fed is making a serious mistake.

"The bond market seems to be signaling that the Fed is making a serious mistake. At -80 basis points (as measured by the 10 year vs 2 year Treasury yields), the yield curve is more inverted now than at any time since the early '80s when double-digit inflation was entrenched," Wood warned in a Twitter thread on Wednesday.

Wood also questioned why "economists are not highlighting that an 80bp inversion in the Treasury yield curve today is much more of a red flag for the Fed today than it was in the early '80s."

"As a percent of the 3.5% 10 year Treasury yield, it is ~23% today vs ~5% of 15% in the '80s," she added, explaining that generally, an inverted yield curve is pointing to a recession and/or lower than expected inflation and in her view "deflation is a much bigger risk than inflation."

"Commodity prices and massive retail discounts are corroborating this point of view," said Wood, highlighting the S&P energy sector price.

"Surprisingly, the S&P energy sector (XLE) price is not far from an all-time high even though the oil price has dropped from $130 per barrel to $74. Meanwhile, many pure play, early stage innovation stocks have dropped below their coronavirus lows. Truth will win out," the ARK Invest CEO concluded.

By Sam Boughedda

You May Also Be Interested In

• S&P 500 could overshoot 4600 in H1 2023 - Oppenheimer
• Sunrise New Energy (EPOW) to supply $240M in graphite anode to a leading Chinese EV Manufacturer
• 'Don't Fight the Fed' is still alive and this week will serve as a reminder - MS Wilson