Cathie Wood of Ark Invest predicts that lower prices and rates will trigger a rise in undervalued stocks

Ark Invest CEO Cathie Wood is optimistic about the potential for stocks to rise as price pressures ease and interest rates decrease. Wood believes that lower interest rates coupled with more price deflation will activate a surge in equities, similar to what occurred in the fourth quarter of last year. Despite her disappointing performance in recent years, including a significant drop in her flagship Ark Innovation ETF in 2022 followed by a rebound in 2023, Wood remains confident in the market’s potential for growth.

Wood has been predicting deflation since mid-2022, contrary to the Federal Reserve’s tightening cycle to combat inflation at the time. She attributed inflation to temporary inventory issues stemming from the pandemic and believes that recent data showing a slight decrease in inflation rates is a positive sign. The consumer price index for April revealed inflation running at a 3.4% annual rate, with the core CPI, excluding food and energy, at 3.6% – the lowest since April 2021.

Wood noted that investors have been flocking to safe havens and cash at a rate not seen since the Great Depression. She believes that the intense search for safety in today’s equity markets reflects a level of fear comparable to that experienced in the 1930s. However, Wood remains optimistic that once fear subsides, the market will reward risk-taking and result in a broader market expansion. Despite experiencing a decrease in her fund’s performance year to date, Wood maintains faith in the market’s potential for growth.

Overall, Cathie Wood’s outlook on the market is one of cautious optimism, with a focus on the potential for equities to rise amid easing price pressures and lower interest rates. Despite facing challenges in recent years, Wood remains confident in the market’s ability to rebound and reward risk-taking. As investors continue to seek safe havens and cash, Wood believes that once fear diminishes, the market will broaden out and present opportunities for growth. With a keen eye on inflation data and market trends, Wood’s perspective offers insights into the current state of the market and the potential for future growth.