We have to go back to the Industrial Revolution to understand what’s going on today.” Global real gross domestic product (GDP) growth has averaged 3% for 125 years. The International Monetary Fund (IMF) expects 3.1% again. ARK CEO and CIO Cathie Wood thinks it at least doubles and says the 10% to 15% Elon Musk has cited is within reach.
In this month’s “In The Know,” Cathie connects the Industrial Revolution to today’s technology revolution. She explains why the yield curve was inverted more than 60% of the time before the Depression and could invert again, what Fed (Federal Reserve) Chairman Kevin Warsh's Jackson Hole speech reveals about which inflation gauge actually matters, and why Abu Dhabi leaving Organization of the Petroleum Exporting Countries (OPEC) could send oil back toward $30. Plus: a 162,000 payroll surprise and Bitcoin finally breaking out against gold.
Key Points:
00:00:00 The Industrial Revolution Is Happening Again
00:02:45 125 Years Of 3% Growth. That's Ending.
00:04:30 Five Innovation Platforms, Not Three
00:07:30 Nominal GDP Is Breaking Out
00:12:15 Before The Depression, Inversion Was Normal
00:19:15 $40 Trillion In Debt. Time To Panic?
00:25:20 Warsh's Inflation Number
00:28:40 Abu Dhabi Leaves OPEC. Oil Peaks.
00:33:35 Gold Peaked The Day Trump Nominated Warsh
00:37:20 Employment Friday Delivered
00:42:35 The AI Capex Breakout
00:46:30 Bitcoin Breaks Out Against Gold
Spoiler - What "Hasn't Happened Since Before The Depression"?
Gemini:
The phenomenon Cathie Wood is referring to that hasn't happened since before the Depression is a persistently inverted yield curve (12:15-13:00).
During the era leading up to the Great Depression, the yield curve was inverted more than 60% of the time, meaning long-term interest rates were lower than short-term rates (13:46-14:05). This contrasts with the post-Depression and post-Fed era, where the yield curve has generally maintained a positive slope, only inverting during periods immediately preceding a recession (13:02-13:20).
Wood suggests that this inversion may be becoming "normal" again, similar to the industrial revolution era, because new, deflationary technological advancements (like the five innovation platforms: AI, robotics, energy storage, blockchain, and multiomics) are putting downward pressure on long-term inflation expectations, while short-term rates reflect real economic growth (14:00-14:40).
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