Ark Invest’s Kathy Wood said technology stocks will bottom out ahead of the broader market on Tuesday, reiterating the historical trend from past crises.
In the wake of the dot-com bubble and the 2008 financial crisis, the tech-heavy Nasdaq Composite hit its stride months before the S&P 500 and therefore recovered earlier.
The innovation-focused investor believes that this time history will repeat itself. During an investor webcast on Tuesday, Wood recounted his experience managing a similarly disruptive tech fund at his last firm.
He said that its relative performance was around Thanksgiving in 2008, while the market did not reach its trough until March 2009. “This is an example of new leadership and it is showing itself in a bear market,” Wood said. “One of the reasons is better growth. Our revenue growth in particular is still very strong and is becoming less and less true for other parts of the economy.”
“When inflation comes down, these companies tend to hide behind modest growth rates … we’ll see how much of that is being pulled from inflation and not really organic growth,” Wood said.
2022 has been a tough one for Wood as his disruptive technology darling has been among the biggest losers this year due to rising rates. Teladoc Health and Zoom have lost 68% and 42%, respectively, this year. Roku is down about 67% this year. Its flagship active fund Ark Innovation ETF (ARKK) is down 61% year to date, falling 72% from its record high.
In addition, investors pulled out a total of $309 million this month. The S&P 500 is down 22% in 2022, officially falling into a bear market this week. The Nasdaq has been hit even harder, down 31% year to date and nearly 34% below its record high last November.
Wood said he believes the market is “quite close” to the bottom, but admitted he was wrong this year with supply chain bottlenecks. Despite a rough year, Wood believes in innovative technology that can ultimately unlock tremendous value.
It had earlier said that its funds should be quadrupled in the next five years. “Innovation gains traction during very difficult times. Innovation solves problems,” Wood said. “Covid has been a warm-up for this period.”
