Ark Investment Management’s Cathie Wood is warning about the risks of US auto debt if there’s a drop in prices.
The prevalence of ride-hailing services mean that people wouldn’t prioritize paying car loans as they did during the 2008-2009 financial crisis, she said in a Twitter post.
Her comments follow a series of tweets from last week saying the Federal Reserve is “making a mistake” with its interest rate increases, and turning inflation into deflation.
If residual auto values deteriorate accordingly, the $1+ trillion in US auto debt will be in harm’s way. Autos were the best credit in 2008-09, as individuals prioritized their auto loan payments at the expense of mortgages so they could get to work and stay employed.
— Cathie Wood (@CathieDWood) September 12, 2022
This time around, thanks to ride-hailing - and soon less expensive autonomous taxis - individuals are unlikely to prioritize auto debt payments over mortgage payments, which could turn backward-looking quant models upside down.
— Cathie Wood (@CathieDWood) September 12, 2022
The used-car market is showing signs of softening after prices skyrocketed during the pandemic. An index by Manheim Auctions, the world’s largest reseller of used vehicles, showed prices fell 4% last month.
This article was provided by Bloomberg News.