Cathie Wood says we are in a strong bull market and as long as there is no recession, ‘we will probably be fine’

Cathie Wood of Ark Invest
Catherine Wood, chief executive officer and chief investment officer, Ark Invest, speaks during the Milken Institute Global Conference on October 19, 2021 in Beverly Hills, California. Photo by PATRICK T. FALLON/AFP via Getty Images
  • “We’re in a very strong bull market,” Ark Invest’s Cathie Wood told Barron’s in an interview on Wednesday. 
  • As long as there’s no recession, the market will probably be “fine” despite concerns about inflation and taxes, she said.
  • Wood believes inflation, which is running at a 31-year high, won’t remain this hot for long.
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Cathie Wood believes the bull market for stocks has shown its strength by shrugging off mounting price pressures, and unless an economic downturn hits, it’ll probably keep up its winning ways.

The Ark Invest chief acknowledged the “wall of worry” being climbed by investors faced with hot-running inflation, speaking in an interview with Barrons on Wednesday.

But Wood pointed to how equity markets shrugged off bond moves earlier this year.

“If you look at the bond market — even though we had a doubling in bond yields for the first quarter, the stock market was up, despite that heart attack in the bond market,” she said.

“That was a loud signal to us that we’re in a very strong bull market, and as long as we don’t fall into a recession, we’re probably going to be fine,” Wood added.

After US inflation climbed to a 31-year high last week, government bond yields surged on the prospect it might prompt the Federal Reserve to move faster on an interest rate hike. Some analysts predict high inflation could last until the second half of 2022.  

Yet the US stock market has hit record high after record high. The S&P 500 has risen by 25% so far this year, driven by robust corporate earnings and evidence of the strength in the underlying economy. Wood’s flagship ARK Innovation fund has fallen 8% this year, but over the past three years, it’s gained 175%, compared with a 75% gain in the S&P.

Wood laid out her reasoning for remaining upbeat, based on her experience of inflation and markets in recent years.

The popular stock picker said the strongest bull markets she has been involved with have typically climbed a wall of worry, and when she started out in the 1980s, the worry was inflation – though it was going down, in a cyclical sense.

“Last year, growth stocks, especially those associated with innovation like our strategies, were on fire — we could do nothing wrong. We didn’t think that was going to be a very healthy market if it continued to narrow.”

Wood has shown she believes the current rates of inflation will fade, and laid out the deflationary forces she sees in Twitter exchanges with Elon Musk and Jack Dorsey.

This year, though, the market has broadened out, Wood said. She noted that value stocks, cyclical stocks and even defensive stocks have done quite well in the face of changes in the economy, as it reopens from the COVID-19 pandemic.

Another cloud hanging over stock markets is the proposal to introduce a 15% global corporate minimum tax, agreed at the G20 Summit in late October. One part of the plan would let countries tax profit in excess of 10% of revenue at multinationals.

“What I think is going on: The market is climbing a massive wall of worry, and is effectively saying, ‘No, we’re not going to be clobbered with these tax rates in this next proposal. This inflation will not be sustained. In fact, it’s going to unwind pretty quickly,'” Wood said.