Cathie Wood: Market Often Underestimates the Power of Technological Innovation to Reshape the Macro Landscape, Inflation Could Surprisingly Taper

On May 9, Cathie Wood—widely known as "Wood Sister"—shared her market outlook, highlighting a key current signal: despite a sharp rise in oil prices over the past three months, the yield curve remains flat. This bucks the traditional economic cycle pattern, where an "energy shock monetized by the Fed" typically leads to a steeper curve. This time, however, the Fed hasn’t monetized the energy shock, and the bond market may be preemptively pricing in the powerful deflationary impact of AI. Wood noted that the cost of training AI models has fallen sharply, with inference costs dropping even faster. Meanwhile, productivity growth is accelerating faster than official data indicates, and unit labor costs stay low. While the mainstream market narrative centers on tariffs, budget deficits, and persistent structural inflation, innovation-driven deflationary forces are gaining momentum. She projects inflation could cool unexpectedly over the next 6 to 9 months—a development that would have a major positive impact on interest rates and long-duration equity assets. Wood also warned the market often underestimates how quickly and broadly technological innovation is reshaping the macroeconomic landscape.