A Wall Street sign is pictured outside the New York Stock Exchange amid the coronavirus disease pandemic in Manhattan borough of New York City, New York on April 16, 2021 REUTERS Carlo Allegri of REUTERS.
Lower prices for growth stocks as a result of the inflation-driven selloff that began in February would mean that Ark Investment's portfolios should see more than triple in the next five years, star fund manager and founder Cathie Wood announced in a webinar on Tuesday.
Wood, who became the face of the outsized rally in technology stocks like Tesla Inc and electric vehicle maker Zoom Video Communications Inc during the Coronavirus pandemic last year said that falling lumber and copper prices signal that the market is beginning to see signs that the risks are overblown by inflation.
Lumber prices are 6% down from their May 7 highs, while copper prices are down approximately 30% over the same time.
We know it has been a very difficult time in the market for innovation strategies, she said. As a result, Wood has moved into what she called special-purpose investment plays such as S&P 500 companies that badly underperformed the benchmark benchmark.
Inflation fears have weighed heavily on growth stocks since the beginning of the year, causing investors to rotate into so-called Value stocks in sectors such as financials and energy that benefit from rising prices. Russell 100 Growth Index is up nearly 18% for the year to date, while Russell 1000 Value Index is up nearly 7% over the same time.
Wood, whose ARK Innovation ETF was the highest-performing U.S. equity managed actively by Morningstar last year, has seen her performance stagnate with the slowdown in growth stocks. Her flagship fund is down nearly 28% from its early February high of 27,000.
The fund rose on Tuesday in afternoon trading 0.1%.
The focus on Wood's portfolio has largely been replaced this year by an emphasis on so-called meme stocks like AMC Entertainment Holdings Inc. and GameStop Corp, which have risen more than 1,000% since the beginning of January thanks to individual investors who frequent social media sites like Reddit.
Wood said ARK does not search Reddit for stock ideas, but monitors it for the great conversation about the companies that the firm is holding.