Cathie Wood, CEO of ARK Invest, boldly predicts that the Trump administration will create an environment even more favorable for stock pickers than the pro-business era under Ronald Reagan, a period she considers a “golden age” for active equity management. Speaking at the Bloomberg Invest conference in New York, Wood emphasized that lower taxes, deregulation, and policies incentivizing innovation will significantly boost financial markets.
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A New Golden Age for Active Management?
Reflecting on her experience during the Reagan years, Wood described it as a time of exceptional growth for active equity management. She expressed confidence that a similar, even more pronounced, trend is on the horizon, stating, “I think this will dwarf that, and that was pretty good.” Wood believes the US economy is currently exiting a “three-year rolling recession,” positioning the stock market for substantial growth, fueled by a broader range of companies rather than just a few megacap tech giants.
Wood criticized existing regulations as a “menace” during a live recording of the Odd Lots podcast at the conference. She argued that the Trump administration’s focus on innovation and removing obstacles will create a more dynamic investment landscape. She highlighted the administration’s commitment to making the US a leader in innovation as a key driver of this anticipated growth. This renewed focus, she argued, will remove bottlenecks and pave the way for broader economic expansion.
Navigating Market Volatility and the Rise of the Magnificent Seven
Wood’s comments followed a volatile day on Wall Street, where her flagship $5.7 billion ARK Innovation ETF (ARKK) recovered from a 5.4% intraday drop to finish positive, amidst fluctuating stock prices reacting to tariff news. This volatility underscores the challenges and opportunities present in the current market environment. The dominance of the “Magnificent Seven” megacap tech stocks, which saw significant gains in recent years, highlights the concentrated nature of market growth. Wood’s prediction suggests a shift towards a more diversified growth pattern.
Addressing Recent Underperformance and Tesla’s Trajectory
While Wood gained prominence during the pandemic for her successful bets on speculative tech stocks, ARKK has faced challenges recently, underperforming the Nasdaq 100 in three of the past four years and experiencing 14 consecutive months of investor outflows. The fund is down 6.3% year-to-date, largely attributed to the 33% decline in Tesla Inc., its largest holding. Wood, a long-time Tesla supporter, dismissed concerns about CEO Elon Musk being spread too thin, emphasizing his focus on crucial technological advancements. She expressed unwavering confidence in Musk’s vision and innovative capabilities, referring to him as “the inventor of our age.”
Conclusion: A Bold Outlook for the Future of Investing
Wood’s optimistic outlook for the stock market under the Trump administration reflects a belief in the transformative power of deregulation and pro-innovation policies. Her comparison to the Reagan era signifies a potential return to a period of significant growth for active stock picking, driven by a broader economic expansion and a renewed focus on technological advancement. While recent performance challenges and market volatility persist, Wood’s conviction in her investment strategy and her unwavering support for key holdings like Tesla indicate a continued commitment to her vision for the future of investing.
