-
As President Trump’s punitive tariffs took effect, Cathie Wood, famous for her aggressive bets on Tesla is calling for a coordinated fiscal and monetary policy stimulus to restore flagging market confidence.
ARK Invest founder Cathie Wood called on the Trump administration and the Federal Reserve to backstop financial markets amid signs that investors are hoarding cash to weather stormier times.
Her comments came Wednesday, as the U.S. government implemented sweeping punitive tariffs across the board.
In response, many overseas manufacturers have begun parking shipments at U.S. ports, either unable or unwilling to pay the high costs right now, and instead hoping the situation improves or tariffs are rolled back.
If the goods can’t be sold or cleared, the cash that these shipments would usually generate gets tied up—potentially causing liquidity issues for manufacturers.
The result: a growing financing bottleneck that threatens to strain corporate balance sheets, just as companies are trying to conserve cash while awaiting progress in trade talks with China and Europe.
“This swap spread is suggesting serious liquidity issues in the U.S. banking system,” Wood wrote, calling for a coordinated policy measure to prop up sentiment. “This crisis is calling out for some kind of Mar-a-Lago Accord on free trade, in tandem with serious support from the Fed. No more time to waste.”
The ARK Invest fund manager, famous for her aggressive bets on Tesla, was responding to a chart posted by financial blogging site ZeroHedge, which displayed a record inversion in the three-year SOFR spread.
SOFR stands for “secured overnight financing rate,” which is the price banks charge each other for lending against collateral. It replaced the unsecured dollar LIBOR following a historic scandal.
The SOFR spread—measuring the difference between fixed-rate debt costs and equivalent-maturity Treasuries, in this case, the three-year note—is a key gauge of stress in short-term funding markets.
Often viewed as a barometer for the health of the repo market, the spread reflects demand in the vast, secured interbank lending system that quietly underpins trillions in daily financial transactions. When functioning smoothly, this market keeps the broader financial system moving.
A narrowing—or inverted—SOFR spread typically indicates rising demand for interest rate hedges among corporations and financial institutions. But it can also suggest waning appetite for Treasuries, the benchmark asset from which virtually all other securities are priced.
