5 Top Market Predictions From Ark's Cathie Wood

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Related: Ark’s Cathie Wood Makes 6 Predictions for the Coming Years

Although Cathie Wood, CEO and chief investment officer at Ark Investment Management, continues to expect Chinese stocks to perform weakly overall, she said Tuesday she is open to investing in some Chinese companies in the innovation space.

That was one of the key predictions Wood made in Ark’s latest monthly update webinar.

Check out the gallery above for five of them.

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(Photo courtesy of ARK Invest)

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1. Chinese stocks will likely continue to struggle, but some firms in the innovation sector may be worth investing in.

After the Chinese government’s crackdown on Chinese stocks listed in the U.S., Wood continues to expect several of these stocks to continue to struggle.

“The valuation structure of those companies is down and probably not going to come back very quickly [and] may even go down more,” she said.

But later, she said: “I’m sure we’re going to find some very interesting companies in the innovation space, and so we’re going to keep an open mind there.”

Those stocks, however, “will be at a discount to stocks in the rest of the world, and I think that cutting itself off in many ways from the rest of the world is going to undermine its goals longer term,” she predicted.

China has “embraced innovation,” but only “up to a point,” she said, adding: “We’re watching for signals” that China has “done as much social engineering as they feel they need to do.”

(Image: Adobe Stock)

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2. Cryptocurrency continues to provide investment opportunities.

“China leapfrogged our financial services sector,” Wood said on Tuesday. However, “now, with crypto elsewhere, we have a chance to leapfrog it.”

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3. The “struggle between growth and value” goes on.

The “struggle between growth and value” continues, she said.

“Our view is that true growth — true meaning growth stimulated by innovation — is going to be the winner,” she said.

“But this tug of war will continue to play out until it is clear that inflation is not an issue and interest rates are not going to start hitting new highs,” she predicted.

The growth-value dynamic, she said “is really dependent on ... inflation gauges and, I think, they will resolve to the low side, which will be a boon for growth stocks and will probably hurt the value side of the market.”

(Image: Shutterstock)

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4. There are “deflationary signals” in the market.

“We’re seeing some deflationary signals right now that are cyclical in nature,” she said. Oil prices “cracking here from $77 on July 6 to $69 today is, I think, something, if it were to continue, that will convince a lot of people” about that, she told viewers.

The auto industry, meanwhile, continues to blame declining car sales on chip shortages, and “I’m sure that’s true to some extent,” but there are clues that more is going on, she said.

For one thing, General Motors and other automakers recently decreased their earnings forecasts despite knowing about the chip shortages for a long time, she said. “That tells us that there is an underlying weakness” in the auto sector, she said.

Copper and lumber prices are also down, she pointed out.

“We really believe that some of these statistics are going to start feeding into the inflation indicators directly or indirectly and that the surprises later this year from an inflation point of view are going to be on the low side of expectations,” she said.

(Image: Shutterstock)

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5. The spending packages pose an inflation threat.

It is understandable why some analysts think inflation will go up, while others think it will decline, according to Wood.

“If you look at the fiscal policy packages that might be coming our way” in the U.S., “those could be considered extremely inflationary, especially if the Fed is going to monetize them,” she said.

But she said: “We don’t think all of that’s going to get through — in fact, we think very little of it is going to get through. We’re hoping the infrastructure package gets through without” a potential negative for cryptocurrencies from the proposed tougher tax enforcement on crypto transactions.

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