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Cathie Wood: The market misreads the strong non-farm payroll, and productivity gains brought by AI will suppress inflation

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Mars Finance News, June 6 — Ark Invest founder Cathie Wood posted that the latest U.S. employment report shows strong performance, but the market has misinterpreted it. Non-farm employment increased by 172k jobs, exceeding the market expectation of 88k. However, the market subsequently sold off. She believes that the market is assuming that stronger-than-expected employment and growth will lead to accelerated inflation, but historical experience does not support this judgment. The current productivity growth rate is close to 3%, with unit labor costs around 0.5%, which is not characteristic of an inflationary boom but rather healthy growth driven by productivity, which will reduce inflation in the long term. Although, based on a three-month moving average, oil prices have risen approximately 55% year-over-year, the yield curve remains flattening. She believes that the bond market is pricing in a stronger force, namely the disinflationary impact brought by technological innovation, especially AI, which is beginning to increase productivity across multiple sectors of the economy. If tensions with Iran ease and oil prices fall, inflation could turn negative before the end of the year. The Federal Reserve’s large rate hikes in 2022 in response to mainly supply-driven inflation shocks were a historic policy mistake, and the next generation of monetary policymakers may not be willing to repeat this mistake. If ARK’s research is correct, the next phase of this cycle could feature a combination of accelerated growth, declining inflation, falling interest rates, and a strengthening dollar, creating a favorable environment for innovation-driven stocks and technologies that will drive the next productivity boom.
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