On episode XLIX of “In the Know,” (November 3, 2023) ARK CEO/CIO, Cathie Wood, weighs in on risks of inflation vs. deflation, currencies as flights to safety, and what’s contributing to this rolling recession. Cathie is also joined by ARK Analyst, Ali Urman, who shares exciting and hopeful news within the multi-omics space – specifically regarding gene-editing treatments for sickle-cell disease and beta thalassemia. (Please find the full video Ali references here:

This month we’re again responding to a few requests by supplementing this episode with charts and data to help illustrate ARK’s perspective on and outlook for the global economy.

As always, Cathie discusses fiscal policy, monetary policy, market signals, economic indicators, and innovation. We hope you find this monthly series useful, especially during periods of heightened volatility. Stay Healthy. Stay Innovative.

00:00:00 Intro
00:00:47 Cathie Intro
00:01:44 Fiscal Policy
00:04:07 US Federal Budget Deficit or Surplus as a Percent of Nominal GDP
00:07:46 Monetary Policy
00:08:18 Money Supply (M2) Growth Percent Change Year-over-Year
00:10:21 2s-10s Yield Curve Spread
00:14:50 Temporary Help Services Employment Leads Total Employment
00:15:22 National Association of Realtors Housing Affordability Index
00:16:08 US Existing Home Sales (SAAR) – Volume
00:16:50 US Auto Sales Total Annualized SAAR
00:19:30 Evercore ISI Survey Charts
00:23:34 Market Signals
00:23:52 Bloomberg Commodity Index
00:25:40 USD Index (DXY)
00:27:53 Foreign Holders of Long Term US Treasuries – Mainland China
00:30:10 Non-farm Unit Labor Costs, SA, Change Y/Y
00:31:57 Metals/Gold Ratio Against US 10 Year Treasury
00:35:43 Bitcoin (BTC)
00:37:25 Innovation & Multi-omics Sequencing
00:39:24 Ali Urman
00:42:35 Victoria Gray Shares Her Story
00:46:20 Cathie Conclusion

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2% Long-Term Interest Rates: What It Means for the Economy and Investing

In recent months, there has been a lot of talk about long-term interest rates and their impact on the economy and investment landscape. With the Federal Reserve keeping short-term interest rates near zero, all eyes are on long-term interest rates as they play a crucial role in shaping the borrowing costs for businesses and individuals. One particular rate that has garnered a lot of attention is the 2% long-term interest rate.

Interest rates are a key component in the functioning of the economy, and fluctuations in these rates can have far-reaching effects. A long-term interest rate of 2% signifies the cost of borrowing money for an extended period of time, typically around 10 years or more. This rate is important for the economy as it influences the pricing of long-term loans, mortgages, and other financial instruments. It also reflects investors’ expectations for future economic growth and inflation.

When long-term interest rates are low, it generally signals that investors are pessimistic about future economic prospects. This can be due to factors such as weak economic growth, low inflation expectations, or geopolitical uncertainty. On the other hand, higher long-term interest rates can indicate expectations of stronger economic growth and rising inflation.

In the current economic environment, the 2% long-term interest rate has significant implications for both businesses and investors. For businesses, low long-term interest rates mean that they can obtain financing at more favorable terms, which can stimulate investment and expansion. It also makes it easier for households to access affordable mortgages, supporting the housing market and consumer spending.

On the flip side, low long-term interest rates can pose challenges for investors seeking yield. With bond yields remaining low, investors may have to look for alternative investments to generate returns. This has led to increased interest in high-growth stocks and sectors such as technology and innovation, as represented in Cathie Wood’s investment approach.

Cathie Wood, the founder and CEO of ARK Invest, has been a vocal proponent of investing in disruptive and innovative technologies. In a low-interest-rate environment, she has argued that companies with strong growth prospects will continue to attract investment, as their earnings potential is not as heavily impacted by borrowing costs. This is evident in the performance of ARK Invest’s flagship ETFs, which have gained significant attention for their focus on innovative companies across various sectors.

As the economy continues to navigate through the challenges posed by the pandemic and the recovery process, the 2% long-term interest rate will remain a key metric to watch. It serves as an important barometer for investor sentiment and economic expectations. While low long-term interest rates may create challenges for traditional income-focused investments, they also present opportunities for innovative and forward-thinking companies to thrive.

In conclusion, the 2% long-term interest rate holds significant implications for the economy and investment landscape. It reflects investor sentiment and economic expectations, influencing borrowing costs for businesses and individuals. In a low-interest-rate environment, innovative and disruptive companies may continue to attract investment as they offer growth potential amid challenging market conditions. As the economic recovery unfolds, monitoring long-term interest rates will be crucial for understanding the broader economic outlook and its impact on investment opportunities.