The US economy could be grappling with deflation in the next 6 months, and the Fed could be forced to pivot in the face of demand destruction, ARK Invest's Cathie Wood says

In the next six months, the US economy could be in a deflationary state, and the Fed could be forced to change course.

Fed officials have been fighting inflation all year, and have been trying to bring it down from a 40-year high in June.

Fed officials have said they will keep hiking rates until they see a decline in prices. Demand in the economy is already starting to slow down, so that may not be necessary.

The inflation rate is likely to be low. Wood said in an interview with CNBC that they would not be surprised to see deflation for a number of months. She thinks the Fed doesn't appreciate how much demand has been destroyed.

Demand for gasoline has fallen to 25-year-lows due to high prices. The unemployment rate and the consumer price index lag behind actual inflation in the economy, according to experts.

Retail and commodity prices are falling, which is a symptom of high inflation. According to JP Morgan, markets are pricing in falling inflation.

Wood thinks the US is already in a recession, despite warnings that hiking could cause the economy to go into a recession. The Fed's preferred measure of inflation peaked in February at 5.3%.

She predicted that inflation would surprise on the low side of expectations and that a Fed pivot could be on the horizon.