Star stock picker Cathie Wood of Ark Invest struck a defiant tone in a webinar Tuesday in which she repeated her warning that deflation, rather than inflation, will be the largest risk for financial markets and the economy in the year ahead.
Concerns about rising prices and expectations of rising interest rates have hammered Wood’s flagship $16.1 billion ARK Innovation Fund this year, which is down 24% for the year to date despite a 24% gain in the broad-based S&P 500 index over the same time. The fund, which was the top-performing U.S. equity fund in 2020 due to its bets on so-called stay-at-home stocks, has outsized positions in companies such as Teladoc Health Inc and Zoom Video Communications Inc which are down 40% or more since the start of 2021.
“We feel like we’re experiencing the same kind of naysaying right now” as when Ark previously made large bets on Tesla Inc and bitcoin before both rallied more than 1,000%, Wood said. “Our confidence in our strategy has increased” despite the stock losses for the year to date, Wood added.
Wood sees companies that profit from stay-at-home trends as part of an innovation category that includes Tesla and biotech shares. Among the arguments for innovation stocks are signs from the bond market that inflation expectations are moderating and a broad decline in commodity prices, Wood said.
At the same time, Wood said that she expects the U.S. economy will grow less than many economists expect in the year ahead, prompting a shift back into the sort of innovative companies that can grow regardless of the economic backdrop.
Overall, the ARK Innovation fund has posted investor outflows over six of the last 10 weeks, according to Lipper data. The fund fell 2.4% in afternoon trading Tuesday, more than double the 1% decline in the S&P 500.
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