Fed critic Cathie Wood counts on Republican midterm win for “friendlier” monetary policies

ARK Invest founder and CEO Cathie Wood thinks many of the market’s problems could be alleviated if Republicans win control of one chamber of Congress this midterm.

A well-known hedge fund manager, whose tech investments have been hit hard by the central bank’s restrictive policies, said Tuesday online that a Republican sweep of the House could lead to more welcome economic decisions.

“I don’t think it’s going to be a Republican getting into office,” he said. “It is because economic and financial policies have been violated in some ways.”

Wood, a staunch critic of the Federal Reserve’s interest rate hikes amid decades of deflation, says Fed officials have made the mistake of tightening the economy by using economic indicators to force policy moves.

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Although the US central bank regularly interacts with the president’s administration and Congress, it is an independent institution.

LISBON, PORTUGAL - 2022/11/02: CEO & Chief Investment Officer of ARK Invest, Cathie Wood, addresses the audience at the Altice Arena Center Stage on the second day of Web Summit 2022 in Lisbon.  The world's largest technology conference is back in Lisbon.  The conference will discuss new technologies for four days and how they can affect people's lives.  70,000 people are expected to participate in the event.  (Photo by Hugo Amaral/SOPA Images/LightRocket via Getty Images)

CEO & Chief Investment Officer of ARK Invest, Cathie Wood, addresses the audience at Web Summit 2022 in Lisbon. (Photo by Hugo Amaral/SOPA Images/LightRocket via Getty Images)

Although the Consumer Price Index (CPI) and Personal Consumption Expenditures Index (PCE) inflation indicators have reached record highs, the ARK manager said in an open letter to the Federal Reserve last month that the rise in interest rates “brought the risk of an interest rate problem.” deflationary.”

The latest CPI reading on Thursday is expected to show annual inflation of 7.9% in October, while the core CPI, which removes volatile food and energy components from the scale, is expected to come in at 6.5%.

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“What’s interesting is the political climate, traditionally, the market has done well under Democratic administrations,” Wood said, noting that the Republican response is often that their party cleans up liberalism and spending money.

“It looks like we’re back here,” Wood added, lamenting that monetary policy has become too tight. “This is a metaphor for an election year but for democracy.”

Meanwhile, ARK Innovation ETF (ARKK), ARK Invest’s investment vehicle, is down 63% since Tuesday’s close.

Wood predicted friendly cryptocurrency policies under the GOP’s minority administration of Congress and said tax cuts would be “new.”

He also said that gridlock could benefit markets, while Republican support for “all-in-one” energy production could reduce inflation.

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“There will be a change from the administration of the Conservatives to a plan to encourage all kinds of energy production to get out of inflation,” Wood said in a monthly website. He also said that the Republican oil and gas policy is good for national security because of the dependence on foreign countries, which points to the problems in Europe.

Alexandra Semenova is a reporter for Yahoo Finance. Follow him on Twitter @alexandraandnyc

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