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We’re not too worried about how inflation and rates are hurting ARK, they said

Cathie Wood, a well-known tech investor, sticks to her style of investing, which is to make big bets on companies that everyone is talking about. This is true even though her funds took a beating when stock markets fell into bear territory because of worries about inflation and rising interest rates.

In a new interview with Goldman Sachs, Wood said, “We’re not too worried because there are already signs that inflationary pressures are starting to ease.” “We’ve always thought that the current rise in inflation is just a one-time shock to the system, but it’s been going on a lot longer than we thought it would.”

Wood said again that “inflationary pressures have started to unravel” by pointing out that global shipping rates are going down and that retailers may have to offer discounts because they have too much stock.

“I do think we are on the other side of the inflation problem,” Wood said. He later added, “I think the rates market is telling us that inflation will eventually come down to levels that are consistent with positive real growth, and I’m surprised that more investors don’t seem more reassured by this.”

Investors haven’t been given much to feel good about lately.

All three major stock market indices lost their early gains on Tuesday, traded in the red for most of the day, and ended with mixed results as investors got ready for a Fed meeting on Wednesday that could be more hawkish.

On Monday, U.S. stocks fell into a bear market, with the S&P ending the day more than 20% below its January record high. The sell-off seems to have been caused by an unexpectedly high Consumer Price Index (CPI) on Friday, which made people worry about rate hikes again.

Wood’s best-known Ark Innovation ETF, which gained a lot of attention for its big gains in 2020 and 2021 when interest rates were at record lows, is mostly made up of risky early-stage tech companies. These companies, in particular, are losing more money or making less money now that interest rates are going up and the economy is growing more slowly.

Wood has recently been buying the name Coinbase, which is a cryptocurrency platform. Shares are down 80% so far this year because of a new crypto winter, which has slowed the company’s growth. On Tuesday, the company said it would cut its staff by 18 percent.

The top three stocks that ARKK owns, Zoom, Tesla, and Roku, have also lost a lot so far in 2022.

Wood doesn’t sound like an investor who is scared, though.

“Many people have called our strategies ‘profitless tech,’ ‘concept capital,’ or ‘tech wreck,'” she told Goldman. “These are terms you didn’t hear during the tech bubble.” “In some ways, that’s great because it means that a lot of bad news has already been priced in. Despite this pessimism, the general estimate for our portfolios’ revenue growth from 2022 to 2024 is between 25 and 27 percent “range. ” If this was like the tech bubble all over again, our portfolios would show negative expected revenue growth.”

Cathie Wood, founder and CEO of ARK Investment Management LLC, speaks at the Skybridge Capital SALT New York 2021 conference in New York City, U.S., on September 13, 2021. REUTERS/Brendan McDermid Wood went on: “The consensus estimate for our companies’ gross margins, which we think gives us an idea of how profitable they are at their core, is also that they are going up slightly. At this point in the tech bust, margins were going down. Even though these things are different, investors are still running for the hills, or towards their benchmarks. We think this is a mistake, just like racing towards the dream during the dot-com bubble.

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Kathy Lewis

Kathy Lewis is an all-around geek who loves learning new stuff every day. With a background in computer science and a passion for writing, she loves writing for almost all the sections of Editorials99.

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