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Cathie Wood says market is pretty close to a bottom, tech stocks will hit trough and recover first

Ark Invest’s Cathie Wood said Tuesday technology stocks will hit the bottom before the broader market, repeating a historical trend from past crises. In the wakes of the dot-com bubble and 2008 financial crisis, the tech-heavy Nasdaq Composite hit its trough months before the S & P 500 did and therefore recovered first. The innovation-focused investor believes the history will repeat itself this time around. During an investor webcast on Tuesday, Wood recounted her experience managing a similar disruptive tech fund at her last firm. She said her relative performance bottomed around Thanksgiving in 2008, while the market didn’t reach its trough until March 2009. “This is an example of the new leadership taking hold and it does show itself in a bear market,” Wood said. “One of the reasons for that is superior growth. Our revenue growth rate especially is still very strong and that is becoming less and less true for the other parts of the economy.” “When inflation comes down, these companies hiding behind nominal growth rates … we will see how much of that is pulling from inflation and not truly organic growth,” Wood said. Wood has had a tough 2022 as her disruptive technology darlings have been among the biggest losers this year in the face of rising rates. Teladoc Health and Zoom have dropped 68% and 42% this year, respectively. Roku has slid roughly 67% this year. Her flagship active fund Ark Innovation ETF (ARKK) is down a whopping 61% year to date, falling 72% from its record high. Further, investors pulled a total of $309 million this month. The S & P 500 has dropped 22% in 2022, tumbling into a bear market officially this week. The Nasdaq has been hit even harder, down 31% year to date and off nearly 34% from its record high, reached last November. Wood said she believes the market is “pretty close” to a bottom, but she acknowledged that she’s been wrong this year with lingering supply chain constraints. Despite a difficult year, Wood remains a believer in innovative technology that can ultimately unlock tremendous value. She previously said her funds should quadruple over the next five years. “Innovation tends to gain traction during very difficult times. Innovation solves problems,” Wood said. “Covid has been a warm-up for this period.”

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