- Cathie Wood says that growth stocks should soon take the lead in the market as the recession runs its course.
- “Typically, growth stocks will outperform as we move toward the end of a bear market and a recession because they are the new leadership.”
- “What we do see in these earnings results is that we are in a recession… We think it’s coming through loud and clear. We have seen advertisers cut back drastically.”
Ark Invest Director Cathie Wood, speaking in an interview this Friday for CNBC’s “The Tech Trade Special,” said growth stocks should soon take the lead in the market as the recession runs its course.
“Typically, growth stocks will outperform as we move toward the end of a bear market and a recession because they are the new leadership.”
Among the companies that have lost the most this year to rising rates are Wood’s favorites of disruptive tech companies. For example, its flagship fund, Ark Innovation ETF (ARKK) has already lost 52% so far this year, likewise, its big holdings like Roku are down 70% this year. However, ARKK has recently posted its first monthly gain since October. Wood commented:
“It looks like, at least so far, we bottomed intraday based on our flagship strategy on May 12. In fact, we bottomed out before the Nasdaq and the S&P… That was an early sign that we could be turning a corner here.”
The investor has long been predicting a recession, due in large part to a build-up in excess inventories, noting that so far this earnings season it’s obvious we’re in a recession.
“What we do see in these earnings results is that we are in a recession… We think it’s coming through loud and clear. We have seen advertisers cut back drastically.”
Wood has been warning of emerging deflationary forces, even continuing to do so as the Federal Reserve seeks to raise rates in hopes of curbing rising prices. As reported by Market Times, the Fed confirmed its second consecutive increase in the interest rate by 75 basis points.
As Wood has argued, the central bank would be making a policy mistake by aggressively raising rates when inflation begins to peak. Previously, he would have claimed that the Fed will have to turn its policy around given deflationary forces.
“Within the next year, the Fed will loosen its policy… The recession could continue if it keeps raising rates and the yield curve keeps inverting.”
Wood has made some major purchases this week, revealing that he increased his stake in Roku on Friday, amid a 23% selloff on disappointing results.
“This is a commitment to move from linear television to digital and streaming technology… Sports are moving towards streaming and connected television markets.”
Finally, the director of Ark Invest has also bought more shares in Shopify and Teladoc after the falls caused by the results. It is notable that she, likewise, sold Coinbase shares for the first time in 2022.
