Ark’s Cathie Wood sees U.S. now in recession, expects energy stocks to plummet

Energy stocks and other value stocks could fall “casualties” of falling inflation, said Kathy Wood, ARK Innovation Fund’s star stock picker, returning to reality during a webinar Tuesday.

Instead, lower rates should benefit growth stocks as broad economic needs become more scarce, she said.

“I believe history will show that we are in a recession all year,” Wood said.

With inflation soaring to a 40-year high and the Federal Reserve embarking on its most aggressive pace of rate hikes in a generation, Wood has been one of the most high-profile investors caught on the wrong side of rising rates this year.

Rising interest rates have weighed heavily on the kind of “innovative” growth stocks Wood has focused on by raising borrowing costs, many of which are unprofitable.

The ARK Innovation Fund is down nearly 63% year-to-date, the worst performer among U.S. mid-cap growth funds in its class and one of the worst overall active U.S. equity funds tracked by Morningstar.

The fund’s performance this year is a far cry from 2020, when ARK Innovation more than doubled its stock price by placing big bets on Zoom Video Communications Inc and other “stay-at-home stocks” that soared early in the coronavirus pandemic.

By comparison, U.S. energy stocks are up nearly 56% so far this year.

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 was up 0.2 percent in midday trading on Tuesday, lagging the benchmark S&P 500’s 0.6 percent gain.

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