“When consumers lose confidence, they are afraid to spend,” she said. Big increases in consumer installment debt suggest small businesses are taking down their credit lines, which always happens at the start of a crisis and leads to a lower consumer savings rate, she said.
Wood, who considers Walmart and Target to be among the two best supply chain-managed corporations in the world, noted that high stockpiles imply more general difficulties among retailers.
Consumers will wait for reduced costs, which will impede the movement of money, she predicts. That is likely to happen in the gas-powered automotive sector, where disruptive innovation is accelerating as consumers attempt to transition to electric vehicles faster than predicted due to high gas prices.
Five-year credit default swaps — effectively insurance plans against defaults and bankruptcies — have more than doubled this year, according to the Ark Invest CEO, signaling that risks are mounting.
“There’s real concern about what’s going on out there,” she said. “I think this has been incorporated into the market. What we need to see is the Fed’s recognition and I think it’s coming. I don’t know what the breaking point will be.”
