Ark Invest CEO Cathie Wood says investors are looking at the wrong historical period in making comparisons with the current high inflation environment.
“If you go back to the 19-teens, then the period was very similar to the period we’re in today,” she said at the Finimize Modern Investor Summit, where she appeared by video on Tuesday. That period featured a war (World War I), a pandemic (Spanish flu) and supply-chain problems. Pointing to the impact of electricity, the telephone and the automobile, she said it was also “the most prolific period for innovation in history.”
Inflation, she noted, went from 24% in June 1920 to -15% in June 1921. While she’s not forecasting inflation of -15%, she did assert that inflation on a year-over-year basis will turn negative. “What has happened during the last few years is going to flip, and we think that the market will flip back to a preference for growth stocks and our innovation strategy,” Wood said.
Wood also elaborated on a tweet from earlier in the day about the depth of the inversion of the yield curve.
“That’s the bond market saying, ‘Hello, Fed, are you watching?’” she said, adding that Federal Reserve Chair Jerome Powell is trying to be the reincarnation of Paul Volcker at a time when it’s not appropriate. “I think that’s a mistake, because this is not a 15-year problem, it’s a 15-month one,” she said. Already, she noted, commodity prices are tumbling, supply chains are healing and companies are struggling with too much inventory.
Wood pointed out that even though Ark’s flagship fund has struggled this year — the ARK Innovation Fund
ARKK,
-0.78%
has dropped 63% in 2022 — investors have not been pulling their money out. According to FactSet, the innovation ETF has brought in $1.4 billion in inflows this year.
She says that’s because it’s a hedge and is different from other products. Apart from Tesla
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and Nvidia
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+0.83%,
most of Ark’s investments are not in broad-based benchmarks. “They are all about the future and disrupting the way the world is going to work,” she said.
Ark has been concentrating its portfolios as it waits for inflation dynamics to be supportive to innovation, she added. The innovation fund, for instance, has been narrowed to 32 companies from 58, Wood said, as the firm has become less convinced that China is supportive of innovation.
