Popular investor Cathie Wood who leads the investment management firm Ark Invest said on Wednesday the equities of innovative companies that have seen declines this year should be “rewarded handsomely.”
What Happened: Wood, citing data for November, said retail inventories have risen at the fastest pace since the 1990s as businesses and consumers overreact to supply chain issues and fear of inflation.
The Commerce Department on Wednesday said retail inventories rose more than 2% in November while imports jumped 4.7% and exports dropped 2.1%, even as real consumption (including services) was flat and the saving rate dropped to 6.9%, below pre COVID-19 levels.
The consumer sentiments dropped to a level last seen at the worst of the coronavirus crisis in 2020, Wood said, citing the University of Michigan.
“Both businesses and consumers seem to have overreacted to supply chain bottlenecks by building ‘inventories’ of goods while government stimulus was flowing freely,” Wood wrote on Twitter.
The popular investor who has a large exposure to equities of companies like Tesla Inc TSLA, Zoom Video Communications Inc ZM, Block Inc SQ and is building a stake in Xpeng Inc XPEV, said the third-quarter GDP increase of over 2% was all in inventories.
“This buildup, along with M&A and IPOs, reminds me of Y2K,” Wood said, adding that this time the excesses are likely to be in industries that technology will disrupt: energy, financial services, and transportation among others.
“In our view, fears of inflation will give way to confusion and fears of recession during the next three to six months,” Wood concluded, adding rapid growth rates of truly innovative companies should be restored.
Wood is known to not be hesitant in booking profits in favorite stocks when they run up significantly and seek to buy back again at lower levels. She, in October, said that inflation had not taken off and that she expected deflation to play out in the near future.
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