Are we already in a recession? ARK Invest’s Cathie Wood thinks so

The stock market is ailing, bonds have sold off, inflation is sky-high, and cryptocurrencies are collapsing, but are we in a recession?

Predictions of impending economic doom are certainly widespread, but most economists argue we’ve yet to enter a true recession—at least for now.

ARK Invest’s Cathie Wood isn’t convinced.

The superstar fund manager, who is known for her big bets on innovative tech firms, said on Tuesday that she believes the U.S. economy is already in the midst of a recession—we just haven’t declared it officially.

To understand Wood’s theory, it’s important to remember that the technical definition of a recession has for years been a period with two consecutive quarters of negative economic growth as measured by gross domestic product (GDP).

By that definition, we could find out the U.S. economy is already in a recession when GDP data is released at the end of August, following the 1.4% decline in GDP seen in the first quarter.

“We think we’re in a recession,” Wood told CNBC’s Squawk Box on Tuesday. “A really big problem out there is inventories, the increase of which I’ve never seen in my career, and I’ve been around for 45 years.”

Wood is referring to inventories at retailers like Target and Walmart, which have spiked in recent months amid Americans’ shifting spending habits. It’s a phenomenon that could signal a slowdown in U.S. consumer spending, which makes up roughly two-thirds of GDP, as well as sustained supply-chain issues.

“We’re talking about the best managed companies in the world, if you’re talking about Walmart and Target. They know how to manage supply chains, so if they have problems, we think there are a lot more problems,” she said.

Inventories aren’t the only clue that consumers are tightening their budgets. Falling consumer sentiment could be a warning sign that the U.S. economy is already in a recession as well, Wood said.

The University of Michigan’s consumer sentiment index fell to a record low in June as four-decade-high inflation continued to frustrate Americans. That has economists worried about the potential for a pullback in spending as people continue to get frustrated by their fading purchasing power.

Finally, Wood admitted in her Tuesday interview that she was wrong when she argued that inflation would be transitory.

“We were wrong on one thing and that was inflation being as sustained as it has been,” she said.

Wood said she “can’t believe” it’s taken more than two years to begin to resolve the supply-chain issues that became such a headache for businesses during the pandemic. And, like everyone, she was surprised by the war in Ukraine, which has only added to inflationary pressures.

Wood has for years made the case that deflation, not inflation, is the real economic boogeyman. And she stuck to her guns on Tuesday, arguing the current rise in inflation will eventually fade, and deflationary trends like technological innovation and a slowdown of population growth will lead consumer prices to plummet.

In this deflationary environment, Wood believes her ETF’s innovation-focused holdings will outperform, and said her clients are sticking with her as a result.

“We are dedicated completely to disruptive innovation. Innovation solves problems,” she said.

This story was originally featured on Fortune.com