By Suzanne McGee
(Reuters) – U.S. technology investor Cathie Wood is calling on Donald Trump’s incoming administration to boost economic growth and political certainty by rolling back promised corporate and personal tax cuts to Jan. 1, 2025, she told Reuters.
A laggard in recent years, Wood’s flagship exchange-traded fund, ARK Innovation (NYSE:), is up 17% since Trump’s victory, which is expected to bring policy changes that will benefit the fund’s holdings. .
Two of its stocks, electric car maker Tesla (NASDAQ 🙂 and cryptocurrency exchange Coinbase (NASDAQ 🙂), are already up 54% and 7% respectively since November 6, while they are up around 1 .7% in that time.
ARKK’s other top holdings include Robinhood (NASDAQ:) and Block, both of which could also benefit from friendlier crypto and AI policies.
Wood has publicly endorsed Trump’s economic platform, arguing that his plan to boost deals, promote innovation in cryptography and artificial intelligence, and reduce government bureaucracy and costs will make life easier for American businesses.
Tax policy was also central to the race, with Trump promising to reduce the rate paid by companies that make goods in the United States and extend individual tax cuts that Congress passed in 2017 and are set to expire next year.
That’s a key area where Wood said he’s pushing for more clarity.
“I see them saying, okay, we’re going to cut taxes, but we’re going to make them retroactive to January 1, 2025. I think that would be very helpful in terms of providing certainty to the markets,” Wood said in an interview.
“If they don’t, businesses and individuals may stop… I’m trying to communicate that pretty regularly to anyone who’s willing to listen.”
While Wood said he generally does not support tariffs, which act as a tax increase on goods, Trump’s threat to raise them on major trading partners appears to be a negotiating strategy.
TAX REFORM
Analysts expect the new Republican-controlled Congress to implement tax reform next year, but Trump will implement other key policies with executive orders after his inauguration on January 20. It has also announced new regulators who can begin to implement its pro-innovation agenda.
Campaign finance records indicate that Wood did not financially support Trump in the 2024 election cycle.
She told Reuters she only met Trump once, earlier this year at his Florida home, but is in contact with Tesla boss and billionaire Trump supporter Elon Musk and Republican senator from Wyoming cryptocurrency enthusiast Cynthia Lummis, who are helping shape Trump’s policies. .
Wood has been one of Musk’s biggest cheerleaders, investing 16% of ARKK’s $6.4 billion in assets in Tesla. That big bet reflects his confidence in Musk and his belief that AI, including autonomous vehicles, will be a major driver of investment returns in the future, he said.
“He understands that technologies are converging, that artificial intelligence is the biggest catalyst,” Wood said.
However, it is selling some Tesla shares to reinvest in other companies that are likely to benefit from the same trend, such as Archer Aviation, a developer of autonomous aircraft.
Florida-based ARK has also been a prominent proponent of cryptocurrencies and launched a spot bitcoin ETF in January. Wood said a crackdown on cryptocurrencies under President Joe Biden put the United States in a vulnerable position, but that the new administration “won’t want to lose innovation to the rest of the world.”
Lummis said in a statement that engaging with stakeholders was a priority and that “Wood is a leader in digital assets and someone who has shared feedback with me on a number of innovation-related issues.”
Although some of the market exuberance over Trump’s victory has faded, Wood said he believes Trump’s momentum, which has benefited financial, small-cap and cryptocurrency stocks, will eventually spread to a larger portion of the market. .
“I think… the market will continue to expand. It will definitely favor innovation and everything that has been held back by policies in recent years,” he said.
Neither Musk nor the Trump transition team responded to requests for comment.
‘OPERATIVE PATTERN’
Wood’s huge bets on stocks like Zoom (NASDAQ:) generated a 152% return at the height of the pandemic and earned him a large retail following, but he has struggled to maintain that outperformance.
Investors have withdrawn roughly $3.5 billion from ARKK over the past two years, with $300 million leaving last month, according to data from Morningstar and VettaFi.
“That’s an atypical pattern for most ETFs and mutual funds, but typical of the opposite pattern we’ve seen for Cathie Wood funds,” said Morningstar analyst Robby Greengold.
Wood said even the most favorable new policies won’t end that volatility.
“We’re telling people that we offer highly differentiated exposure to innovation.” As a result, he added: “yes, we’re going to be volatile.”