Energy stocks and other value stocks will likely be “casualties” of falling inflation, said Cathie Wood, the star stock picker whose ARK Innovation Fund has come back down to earth, in a webinar on Tuesday.
Instead, lower interest rates should be a “boon” to growth stocks, she said, as widespread economic demand becomes more scarce.
“I believe history will show that we have been in a recession all year,” Wood said.
Wood has been among the highest-profile investors who were stuck on the wrong side of rising interest rates this year as inflation soared to 40-year highs and the Federal Reserve engaged in the most aggressive rate-hiking pace in a generation.
Rising interest rates have weighed heavily on the sort of “innovative” growth stocks, many of which are unprofitable, that Wood focuses on by raising the cost of borrowing.
The ARK Innovation Fund is down nearly 63% year-to-date, the worst performance among U.S. mid-cap growth funds in its category and putting it among the worst-performing active U.S. equity funds overall tracked by Morningstar.
The fund’s performance this year is a far cry from 2020, when ARK Innovation more than doubled by making outsized bets on Zoom Video Communications Inc and other “stay-at-home stocks” that sky-rocketed during the early stages of the coronavirus pandemic.
U.S. energy stocks, by comparison, are up nearly 56% for the year-to-date.
U.S. consumer prices rose less than expected for a second straight month in November, leading to the smallest annual increase in inflation in nearly a year.
The ARK Innovation fund rose 0.2% in midday trading Tuesday, trailing the 0.6% gain in the benchmark S&P 500.
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