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Ark Invest’s Cathie Wood said Monday that her innovation darlings are poised to lead the market once bonds start to rally and push down interest rates. “We’ve seen very recently a shift into bonds, and interestingly the flows into bonds would suggest that we should not be far behind,” Wood said on CNBC’s ” Squawk on the Street ,” referring to her portfolio positions. “If bonds are going to rally, and we think they will at some point here as inflation continues to come down as the economy continues to go through rolling recessions of sorts, we think that the backdrop will be right for a resurgence in growth stocks generally and in particular long duration innovation growth assets,” she added. The widely-followed investor has been betting on stronger-than-expected deflationary forces, which could eventually bring down bond yields. Lower rates could make the present value of any future earnings and cash flows of Wood’s growth companies worth more. Her flagship Ark Innovation ETF (ARKK) , with top holdings Tesla , Coinbase , Roku and Zoom , has rallied more than 23% this year, outperforming the S & P 500 but falling short of the performance of Nasdaq Composite. The innovation fund has suffered a big investor exodus this year, with $773 million in total outflows, according to FactSet. Wood said it was due to investors taking some chips off the table after the fund’s strong rally. “We did have through July a very significant rally. I do think there’s been some profit taking there,” Wood said. The investor continues to be bullish on the artificial intelligence boom, believing that it is an antidote to inflation and a big driver of productivity . Her top picks in the space include UiPath , a robotics process automation company, and communication software name Twilio .
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