Sister Wood: ‘Explosive’ growth in retailer inventories points to slower U.S. inflation

ARK Invest chief executive Cathie Wood said on Thursday that inventories at major retailers such as Walmart (WMT.US) and Target (TGT.US) had “exploded”, plus U.S. A drop in consumer confidence points to an imminent slowdown in inflation.

Earlier this week, a tweet quoted the world’s richest man, Elon Musk, saying that the latest inflation spike was caused by the U.S. government’s coronavirus stimulus, even as the velocity of money remained the same.

Wood responded to the tweet, saying that consumers were “revolting against declining purchasing power” while spending less. She added that supply chain bottlenecks linked to rising inflation could be caused by companies overordering.

In the past two days, Walmart and Target have reported a 3-4% year-over-year increase in nominal sales and a 3-4% year-over-year decline in unit sales (adjusted for inflation) in the quarter ended April, Wood said. Their inventory is surging.

Specifically, Wood said Walmart’s notional inventory was up 33% year over year and its physical or unit inventory was up 20-25%, compared to Target’s 42% and 30-35% increase in nominal and physical inventory, respectively. Wood added that in her 45-year career, she had never seen such an excess of inventory.

After remaining flat for the past two years, the velocity of money in the U.S. will decline again, Wood said. The sharp decline in consumer confidence and spending over the past few months confirms this view.

Wood said that in the past few months, the annualized growth rate of M2 in the United States has dropped to single digits, and if the speed of currency circulation declines, the United States will face the risk of price deflation.

In the end, Wood said Fed Chairman Powell and Fed governors are concerned about more than short-term supply chain bottlenecks (which may be caused by overordering), as Walmart and Target now have record-breaking inventories.

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