The Tell: Cathie Wood: Fed is probably overdoing it in battle with inflation, warns of deflation signs

As technology stocks were being crushed Tuesday in the wake of a stronger-than-expected inflation report, ARK Investment Managements Cathie Wood was raising concern that the Federal Reserve may be overtightening its monetary policy amid signs of deflation.

Theyre probably overdoing it here, said Wood, ARKs founder, chief executive and chief investment officer, during the firms monthly market webcast on Tuesday afternoon. Theyll let something crack first, including employment, she said, adding that by the time the Fed relents, inflation is going to unravel to something well below its 2% target.

Wood said ARK thinks employment already is cracking underneath the surface, particularly among small businesses, and reiterated her view that the U.S. is already in a recession. Were seeing a lot of deflation in the pipeline, she said, pointing to prices of commodities such as oil, lumber and copper falling steeply from their peaks, along with the Baltic freight index.

U.S. stocks plunged Tuesday, as investors worried the Fed will have to keep up its aggressive pace of monetary tightening to combat stubbornly high inflation. Many investors have feared the central bank risks triggering a recession should it raise interest rates too much too fast in its effort to bring soaring inflation under control.