Female stock god Wood: The U.S. government shutdown may instead usher in a new prosperity and even lead to a decrease in inflation.

In a recent episode of In The Know, Cathie Wood, founder of ARK Invest, conducted an in-depth analysis of the current economic situation in the United States. She pointed out that despite facing challenges such as a government shutdown, a soft labor market, and rising tariffs, the market has demonstrated unexpected resilience. She boldly predicts that the U.S. is heading towards an economy driven by productivity, rather than stagflation or recession. This article is a summary of the highlights from the video, purely market observation, and not any investment advice.

The government shutdown impacts employment, and the Federal Reserve may continue to cut interest rates.

Wood pointed out that although the market remains cautious about the Federal Reserve cutting interest rates, given the ongoing revisions to employment data and the possibility of the government cutting up to 150,000 positions, the likelihood of the Federal Reserve lowering rates again before the end of the year has increased significantly. She believes that not only the private sector but even the government sector is downsizing. This government shutdown is somewhat like a major cleanup, aimed at increasing efficiency and controlling spending.

Tax reform and the return of manufacturing will lead to higher investment returns in the United States compared to the global market.

When discussing fiscal policy, Wood emphasized that the corporate tax reform promoted by the Trump administration has brought significant changes to the United States. She pointed out that the effective corporate tax rate is expected to decrease from the original 14% to 10%, even lower than that of Ireland and Hong Kong, which will play a key role in attracting foreign investment.

Wood stated that these policies will give the market a chance to witness the first real manufacturing revival in the United States in 30 years. Although manufacturing job opportunities will be limited due to automation, the United States is expected to become a more efficient manufacturing powerhouse than China through artificial intelligence and robotics technology.

Tariff pressures have not triggered malignant inflation; instead, they have prompted enterprises to enhance productivity.

In the face of rising tariffs and the resulting pressure on prices, Wood believes that the market's reaction is much milder than expected. She analyzes that companies have not fully passed on costs to consumers; instead, they have been forced to improve efficiency and expand investments in automation and AI, which has suppressed the rise in inflation. Wood does not support the tariff policy but expects inflation to potentially fall below 2% by 2026, with actual inflation approaching 0%.

The slowdown in the velocity of money circulation reflects a shift towards conservative behavior among consumers.

In terms of monetary policy, Wood pointed out that despite the M2 supply annual growth rate rebounding to 5%, the velocity of money has stabilized and may even decline, reflecting consumers tightening spending due to uncertainty, which will limit overall GDP growth. Wood stated: If the velocity does not continue to rise, a 5% monetary growth will mean a nominal GDP growth rate of about 5%. If the velocity falls back, then the growth rate will be below this level. There is confidence that the deficit as a percentage of GDP will drop to at least 3%.

The yield curve has issued a recession warning, but the economy is currently in a "rolling recovery."

Regarding the phenomenon of inverted yield curves, she pointed out that this usually indicates that the Federal Reserve's monetary policy is too tight. Although this indicator has often predicted a recession in the past, Wood emphasized that the U.S. economy over the past three years has been more like a "rolling recession," and is currently gradually recovering.

Technological deflation is brewing, and innovation is driving the new engine of the economy.

Wood particularly emphasized the impact of "benign deflation," such as technologies like industrial robots, DNA sequencing, and electric drives. Whenever the cumulative output doubles, costs decrease by 20% to 50%, which is gradually reducing the overall cost structure of industries. She believes that these innovative technologies will continue to drive productivity growth and create structural expansion opportunities for the economy.

China's deflationary pressure is severe, but the policy is shifting towards productivity and innovation.

Regarding the situation in China, Wood believes that the local deflation problem is more severe than the official data suggests and questions whether the 40% GDP investment ratio is sustainable. She also observes that the Chinese government has gradually abandoned the slogan of "common prosperity" in favor of emphasizing "new productivity" and has curbed excessive involution, particularly in the electric vehicle industry.

Wood pointed out at the end of the video that the strength of gold and Bitcoin ((BTC) indicates investors' concerns about global economic and geopolitical uncertainties. She is optimistic about Bitcoin's long-term prospects, believing that it will ultimately become a "new insurance tool" against the devaluation of fiat currency alongside gold.

She stated that after traveling around the world, she found that everyone is extremely pessimistic about the future of the United States. However, based on ARK's analysis, she believes that in the coming years, the performance of the U.S. economy will be better than expected, and inflation will also be lower than anticipated. She urged market participants not to just focus on news headlines but to dive deeper into the essence of policies to see the upcoming new wave of prosperity.

This article by the female stock god Cathie Wood: The U.S. government shutdown may instead usher in a new prosperity and even lead to a decrease in inflation, originally appeared in Chain News ABMedia.