Cathie Wood, CEO of ARK Investment, has urged investors to reconsider their portfolios, suggesting a more stock and bitcoin-focused approach, and less on bonds. In a recent letter, she highlights that the traditional investment model is no longer effective.
In a recent communication to investors, Cathie Wood states that the traditional 60/40 portfolio allocation has become obsolete, recommending a greater focus on stocks and bitcoin. According to the information, Wood forecasts real GDP growth of up to 7% over the next five years, driven by productivity and the technological revolution.
The ARK consultancy estimates that productivity could achieve sustainable rates of 5%-6%, compared to the previous 3%-3.5% environment. Wood argues that this increase would allow companies to improve their margins, invest more, and raise wages.
Additionally, she notes that technology, especially artificial intelligence, is significantly reducing production costs. For example, the cost of inference for models like ChatGPT has decreased by more than 99% annually, which could lead to technical deflation benefiting both demand and business growth.
Wood also mentions that rising interest rates will not necessarily harm stocks, but will depend on which companies are prepared to face it. Companies with high levels of debt could be more affected in this scenario.
The investor compares the current situation to the Industrial Revolution, suggesting that we could experience high short-term interest rates and an inverted yield curve, but without recessions, which could favour stocks over bonds.
Finally, Wood identifies bitcoin as a potential "insurance policy" against bankruptcy risks in a volatile economic environment, suggesting that its diversification could be key for investors. In her analysis, the correlation of bitcoin with the S&P 500 is 0.06, indicating a low level of relationship between the two assets.
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