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Chapter 1: What is the main topic discussed in this episode?
Bloomberg Audio Studios.
Podcasts, radio, news. Carol Master along with Tim Stenevik live here at Bloomberg headquarters in New York City. Well, 2026, as you know, off and running follows three years of double digit gains for the S&P 500, a total gain of around 80% over those three years. Three years of back-to-back gains as well. That's the S&P.
Three years of back-to-back gains also for the Nasdaq 100, a total gain of about 130% there. And yet, even with the stock market gains in the U.S. in 2025 last year, measured against equities worldwide minus the U.S., stocks have risen around 30%, roughly double the S&P 500's gain. That's according to the MSCI's index.
Chapter 2: What are Cathie Wood's predictions for the economy by 2026?
Here to talk about 2026, the economy, investment ideas. Great to have back with us the founder, CEO, and CIO of ARK Invest, Kathy Wood. She joins us from St. Petersburg, Florida. Kathy, great to have you here. Happy New Year.
Happy New Year, Carol and Tim. Very happy to be here again.
Well, it's great to have you here. And I want to start with what stocks did here in the U.S. really well last year. But if you look at global stocks, you could say that there was certainly some underperformance by the U.S. You've invested in a lot of U.S. names, but also a lot outside the U.S. And I think about Chinese companies, BYD, Baidu, Alibaba.
Are you looking for more opportunities outside the U.S. at this point? And I wonder if you think it's time for maybe U.S. stocks to take a look?
I think we're very focused on the deregulation, lower taxes, and what we believe will be lower inflation, much lower inflation, and lower interest rates in the US. And we think the combination of those is actually going to drive the returns on invested capital in the US up relative to those in the rest of the world.
And I think many people are underestimating, especially on the corporate tax side, that thanks to the new depreciation schedules our effective corporate tax rate, not the statutory, but the effective, will drop to one of the lowest in the world at roughly 10%, certainly near a record low for the U.S.
So do you think, Cathy, that's not priced in yet to U.S. equities? Like have investors not realized that and therefore it's not priced in yet?
You know, it's very interesting. Maybe a lot of your guests have been talking about the depreciation schedules, how how massively they are going to encourage capital investment here in the United States. So we've never had full depreciation in year one of manufacturing facilities, full depreciation in the first year of service.
That means corporations will get huge tax refunds that they will be able to reinvest into innovation because we also equipment, domestic R&D and software. Those three, full depreciation, first year of service, that has been legislated. Normally we get, oh, a few years of this, you know, this cut and that cut. But that has been legislated. Now it's all the time.
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Chapter 3: How does deregulation impact investment opportunities in the U.S.?
Well, GDP growth at 7% plus per year tells you there's going to be a lot of economic activity, more economic activity from a sustained growth point of view than we've seen in quite some time. The history of technology is it's a net job creator. In the early 90s, when developers were evolving the internet, we could not have imagined Uber or Airbnb back then. And I think the same is true now.
We cannot imagine the kinds of jobs that are going to exist in the future. And the other thing that we're excited about from a job creation point of view is we're seeing new worlds being created. And by that, I mean most of us think about Earth But now we're moving into space. Even data centers, we think, Elon leading that charge, will start moving into space.
And we won't have the not in my backyard and the bureaucracy associated with data centers. There's going to be huge job creation around data.
the space exploration and all of the opportunities out there and then the other one and you'll find this in our digital assets section of big ideas is the digital world immutable private property rights we know from economic history the best way to lift people and countries out of poverty is is with private property rights that are immutable.
Well, that is now moving into the digital world for the first time, thanks to blockchain technology. So we're not worried about job creation, but for those who are, because there is something happening that I know is concerning to many people, the unemployment rate for 16 to 24 year olds has moved to 12%, 12%, big increase. And what is that saying?
That's saying that entry-level jobs are not being created the way they used to be. To those people, I say, you know, you must have in your mind an idea for a new business, something that frustrates you, an unmet need. Well, now you can go to ChatGPT, you can go to Grok, and you can have an assistant help you build out that business.
Just interview for jobs, but also think about new business ideas. I think we're going to see entrepreneurial explosion here.
Well, and speaking of entrepreneurial explosion, I think about how long you have certainly been with Tesla and a backer of Elon Musk, a long time. And I think about when we first talked and you likened him to Mr. Einstein, Albert Einstein. But I just wonder, Elon at Davos earlier today, and he talked about the carmaker's fortunes will be increasingly dependent on humanoid machines.
Kathy, how are you modeling this, I mean, into the thesis of Tesla? And is That where the growth is more so than EVs for Tesla going forward?
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Chapter 4: What are the implications of full depreciation for corporate investment?
I think that autonomous taxis and drones Very big parts of that fund as well. And then our flagship strategy is also starting to inflow. It had been held down by the multi omics theme. So this is what we used to call the genomic revolution. And it was a very difficult space. Even though the innovation was taking place, the investment markets were not interested in it for a couple of reasons.
One, lots of investment necessary, therefore not very high, if any, cash flows. And the cash cushions needed to be built up. We think they've done a lot in the last few years to become more efficient. And so we're beginning to see outperformance from that space as well, because now many people are beginning to understand we're seeing cures to disease.
We're seeing early diagnosis thanks to AI and sequencing technologies.
I want to pursue this further with you at a later date and some of the companies that are in that. Just 30 seconds, though. What's your best idea, you think, for 2021? 26 at this point. And I know there's a lot in your research, but is there a best idea or narrative? Just quickly, if you could.
Well, so the top three stocks in our flagship are Tesla. We think it has miles to go. We do take profits from time to time, but it could break out here in a big way as more and more analysts do their homework on robo-taxis. CRISPR Therapeutics has moved into the second position.
That company is curing sickle cell disease and beta thalassemia and has its eyes set on not just rare diseases, but curing the bad cholesterol problem, especially for those who have hereditary issues in that realm. That could be an enormous market. And I don't think anyone is doing the modeling work there the way we are.
I love it. All right. Hopefully we can check back with you as the year plays out. Kathy, thank you so much. Really appreciate it. Kathy Wood, of course, be well. Former founder, CEO, of course, and CIO of ARK Invest joining us
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