David Randall’s NEW YORK (Reuters) — The U.S. Cathie Wood of Ark Invest adopted a belligerent tone in a webinar Tuesday, repeating her warning that deflation, not inflation, will be the biggest risk to financial markets and the economy in the next year.
Concerns about rising costs and rising interest rates have weighed on Wood’s flagship $16.1 billion ARK Innovation Fund this year, which is down 24 percent year to date despite a 24 percent rise in the broad-based S&P 500 index. The fund, which was the top-performing U.S. equities fund in 2020 owing to its bets on so-called stay-at-home firms, has large positions in companies such as Teladoc Health Inc and Zoom Video Communications Inc, both of which are down 40% or more since the beginning of 2021.
“We feel like we’re witnessing the same type of naysaying right now,” Wood said, referring to Ark’s prior significant bets on Tesla Inc and bitcoin before both soared more than 1,000%. “Our confidence in our plan has grown,” Wood noted, despite the year-to-date stock declines.
Companies that profit from stay-at-home trends, according to Wood, are part of an innovation group that includes Tesla and biotech stocks. Signs from the bond market indicating inflation expectations are reducing, as well as a widespread decrease in commodity prices, are among the grounds for innovation stocks, according to Wood.
At the same time, Wood predicted that the U.S. economy will expand less than many experts predict in the coming year, triggering a move back to the type of inventive firms that can flourish regardless of the economic background.
According to Lipper statistics, the ARK Innovation fund has had investor outflows in six of the previous ten weeks. The fund lost 2.4 percent in afternoon trading Tuesday, more than double the S&P 500’s 1% drop.