BIS2020: Cathie Wood | ARK Invest

TL;DR

In this discussion at the Big Ideas Summit 2020, Kathryn Wood, founder and CEO of ARK Invest, shares her insights on the current economic crisis, the impact on various sectors, the potential for innovation, and the future of the stock market.

Transcript

all right welcome back everybody we hope that you enjoyed the first half of Big Ideas summit 2020 the virtual edition so far we've covered coab in nineteen we've covered government policy with doctor laugher and so we're going to continue with now with our chief executive officer and chief investment officer and a total stranger to me and on a kath... Read More

Key Insights

• ⏮️ The current crisis is different from previous economic downturns and is not a systemic financial crisis.
• ⌛ Innovation is expected to accelerate during tumultuous times, resulting in opportunities in various sectors.
• 😘 The stock market may experience volatility and a potential retest of lows, but opportunities arise from mindless quant behavior.
• 💦 Liquidity in the system is expected to continue working, but there may be an increase in inflation in the next few years.

Questions & Answers

Q: How does the current economic crisis compare to previous downturns like the Great Depression and the 2008 financial crisis?

Wood believes that while there are concerns about a depression, the differences in monetary and fiscal policies, such as no tightening and reduced tariffs, suggest this is not a systemic financial crisis like the past. It is a shock to the system triggered by a health crisis, comparable to 9/11 and the 1987 stock market crash.

Q: Which sectors or economies are most vulnerable during the COVID-19 pandemic, according to Wood?

Wood highlights sectors like traditional broadcasting and cable, retail (with the shift to online shopping), energy (especially traditional gas-powered cars), eSports, and industrial manufacturing. However, she also sees opportunities for innovation in areas like robotics, telemedicine, DNA sequencing, and FinTech.

Q: Do you think the stock market has hit the lowest point or will there be another setback?

Wood believes there could be a retest of the lows, drawing parallels to the 1987 stock market crash. However, she notes that the financial system is not seizing up like in 2008-2009, and recent indicators suggest that markets are working. She also sees opportunities for innovation-related strategies amid market volatility.

Q: Will the liquidity being pumped into the system continue to work, and are you concerned about inflation?

Wood acknowledges that the velocity of money went down after the 2008 crisis, but due to fiscal policies and unproductive activities, she anticipates more inflation in the future. She believes the markets and financial system are currently stable, but caution is required, as inflation may increase in the next few years, fueled by increased spending and the growth of innovation.

Q: How soon do you think the economy will get back to pre-crisis behavior? Will we bounce back to the same level?

Wood believes that with the right actions, such as a payroll tax holiday and businesses adapting to the digital world, the economy could recover strongly. She emphasizes the role of innovation and expects a v-shaped recovery, although there may be some inventory shortages and wasted activity due to government intervention.

Summary & Key Takeaways

• Wood compares the current crisis to past economic downturns, highlighting differences in monetary and fiscal policies that suggest it is not a systemic financial crisis like 2008-2009.

• She emphasizes the potential for innovation to accelerate during tumultuous times, with sectors like media streaming, online retail, eSports, energy, robotics, and telemedicine expected to thrive.

• Wood believes that while the economy will be hit hard in the short term, a strong recovery is possible due to innovation and a pivot in government policies, such as a payroll tax holiday.