Ark's Cathie Wood: 7 Predictions for the Global Economy, Markets

2. Oil prices will fall.

Wood said she’s “baffled” by the rise in prices of commodities such as oil while the world “is beginning to unravel.” Long term, however, she sees oil prices declining because of falling demand not only from China but also from institutional investors such as endowments and pension funds that are investing based on environmental social and government factors (ESG).

“Demand is lower today than in 2019.” She likened the long-term outlook for crude oil to the fate that befell whale oil, which had been used to light homes. In the 1840s it was replaced by kerosene, a derivative of crude oil.

In the meantime, the rise in oil prices to slightly above $80 a barrel in the U.S. is a “regressive tax on consumers and that will slow economic activity," Wood said.

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3. Demand for electric vehicles will rise.

“The shift from gas-powered vehicles to electric vehicles will accelerate because of the rise in oil prices,” Wood said.

She touted the electric vehicle automaker Tesla, the firm’s “highest conviction name” in its funds because of this growing demand and because of its “leading edge” positioning to maintain chip supplies while other automakers scramble for them.

Interestingly, Tesla disclosed that it managed to avoid being too affected by the chip shortage through pivoting to microcontrollers and developing new firmware to work with new chips from different suppliers.

Tesla accounts for about 10% of the assets in three Ark ETFs: ARKK, Ark Next Generation Internet ETF (ARKW) and the Ark Autonomous Technology & Robotics ETF (ARKQ).

(Image: Shutterstock)

4. Inflation won't be a problem.

The supply chain bottleneck that is challenging many corporate sectors, including automobiles, appliances and food suppliers, “will be sorted out as the economy slows and the inventory accumulation in home begins to slow down,” Wood said.

She is not worried about rising inflation, but deflation — a position she has expressed repeatedly.

Among the variables that will keep the lid on prices is the decline in the cost of new technology and technology itself.

“Innovation solves problems,” Wood said. According to Wood, technological advances such as artificial intelligence (AI) and automation will increase productivity, which decreases unit costs and declines in the technology costs in the years ahead, which she expects will add downward pressure on prices.

She highlighted the creation of better, higher-paying jobs that increased productivity will yield, not the jobs that will be lost.

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5. Demand for crypto assets will grow.

Wood expects that demand for crypto assets will grow in developed countries and in emerging markets. She referenced El Salvador, where the government has adopted Bitcoin as legal tender, issuing digital wallets that many unbanked citizens can use.

Ark Invest ETFs own the stocks of multiple companies involved in the Bitcoin space either as part of the Bitcoin universe such as Coinbase and Grayscale Bitcoin Trust or as companies involved in other business but invest in crypto such as Tesla and Square.

Ark has also lent its name to two Bitcoin ETF filings before the Securities and Exchange Commission. (Image: Adobe Stock)

6. The U.S. debt limit will be raised.

“We go through this drill regularly. We know it’s not going to happen.”

Wood incorrectly said the government was going to run out of money in a little over a week. An agreement was reached in the Senate late last week to increase the debt ceiling by $480 billion, delaying a potential government default from Oct. 14 to Dec. 3.

She didn't speculate on next developments. At this point, it appears the only way the debt limit can be raised is if Democrats carve out an exemption from the filibuster rule to pass it, which is highly unlikely since at least two Democratic senators oppose modifying the filibuster rule, or if the debt limit increase is added to the Build Back Better bill, which is a complicated procedure, especially when negotiations within the Democratic Party are ongoing.

(Image: Adobe Stock)

6. Biden's Build Back Better plan will shrink.

President Joe Biden’s $3.5 trillion Build Back Better plan “will be whittled down substantially,” said Wood, a fan of the $1 trillion infrastructure plan; the bills’ fates have been inexorably tied together due to politics.

She cited polls in swing states opposing the tax increases that would be needed to support the $3.5 trillion plan — she called such increases “policy mistakes” — but polls are actually split on the Big Back Better plan and its costs.

Those from more conservative pollsters and an internal poll from the Republican Party generally back Wood’s conclusion. Those from more moderate and progressive pollsters show wide support for the program, including its tax increases on corporations and taxpayers earning more than $400,000, though often with little knowledge about the specifics of the plan.

(Image: Adobe Stock)