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Cathie Wood Predicts Market Rebound Driven by Deflation and Lower Interest Rates

Cathie Wood, CEO of Ark Invest, anticipates a significant rebound in the stock market driven by deflation and reduced interest rates, which she believes will invigorate undervalued equities. Wood, who has consistently predicted deflation since mid-2022, attributes the current inflation to pandemic-induced inventory disruptions coupled with the Federal Reserve's stringent monetary policy. Despite a challenging 2022 for her funds, particularly the Ark Innovation ETF which saw a 67% decline, Wood remains bullish on the market's future.

Wood draws a parallel between today's market sentiment and the 1930s Great Depression, emphasizing a prevalent "quest for cash and safety" among investors. She stated, "We believe the current quest for cash and safety in the equity markets is as fervent as during the early 1930s. Once fear subsides, the market will broaden and reward risk-taking once again." This historical perspective underpins her belief that the market is poised for a broad-based recovery once investor confidence is restored.

Despite recent poor performances, Wood's optimism is rooted in her deflationary outlook and the anticipated easing of interest rates. She forecasts that these factors will act as catalysts for "coiled equities," potentially leading to a resurgence in market activity. As Wood continues to advocate for a strategic shift towards undervalued equities, her outlook offers a counter-narrative to prevailing economic concerns, suggesting a more favorable environment for risk-taking and investment growth in the near future.

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