- Cathie Wood sees inflation, as measured by the Consumer Price Index, rising to 3% or 4% in the coming months.
- However, according to Wood, inflation is just a temporary state brought about by monetary and fiscal stimulus as well as supply imbalances.
- "Innovation-based deflation" is set to keep rising costs in check over the long term, the ARK Invest chief says.
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Cathie Wood sat down for Ark Invest's monthly mARKet update webinar on Tuesday and said she isn't concerned about inflation or rising interest rates.
The Ark Invest CEO said she does see inflation, as measured by the Consumer Price Index (CPI), rising to the "3% to 4% range" over the next few months, but argued it won't last.
Wood also said the Producer Price Index (PPI) will "move to the 6% to 8% range or even higher than that" in the webinar.
Still, despite rising near-term inflation, Wood believes that "innovation-based deflation" will help keep rising costs at bay in the long term.
"The technologies and the innovation around which we have centered all of our research and investing is rife with examples of the deflationary undertones that the global economy is facing… innovation-based deflation is very good deflation. It's associated with very strong growth," Wood said.
The Ark Invest chief went on to give multiple examples of how advances in technology act as deflationary forces for the markets.
Wood's first example was about DNA sequencing and the falling costs associated with innovation in that space.
"For every cumulative doubling of the number of whole human genomes sequenced...costs associated with short-range sequencing go down about 40%. The costs associated with long-range sequencing go down about 20%," Wood said.
Wood also gave examples of falling costs due to innovation in battery production and robotics, but noted markets aren't yet feeling the deflationary effects of this innovation because of the relatively low activity of companies in these spaces as of 2021.
"That activity is going to scale exponentially, so these deflationary forces will begin to move the needle in the next three to five years," Wood said.
Wood went on to explain that current inflationary pressures are a result of monetary and fiscal stimulus combined with supply imbalances brought about by the pandemic.
She said these forces will only affect inflation figures temporarily and that she isn't worried about a sustained inflationary environment unless there are problems with the US dollar.
Finally, Wood discussed how she believes the bull market has room to run.
The Ark Invest chief said that the "wall of worry" in the markets today is a good sign for market bulls and that rising savings are an example of the "firepower" the consumer has to add to the economy amid the reopening.