Ark's Cathie Wood calls for tax clarity as she rides 'Trump bump'

Teladoc Health

27/12/2024 11:00

By Suzanne McGee
       Dec 27 (Reuters) - U.S. tech investor Cathie Wood is
calling on Donald Trump's incoming administration to boost
economic growth and policy certainty by backdating promised
corporate and personal tax cuts to Jan. 1, 2025, she told
Reuters. 
    A laggard in recent years, Wood's flagship ARK Innovation
exchange-traded fund  ARKK.P  has surged 17% since Trump's
victory, which is expected to bring policy changes that will
benefit the fund's holdings. 
    Two of its stocks, electric carmaker Tesla  TSLA.O  and
crypto exchange Coinbase  COIN.O , are already up 54% and 7%
respectively since Nov. 6, while the S&P500 has risen about 1.7%
in that time.
    ARKK's other top holdings include Robinhood  HOOD.O  and
Block  SQ.N , both of which could also benefit from friendlier
crypto and AI policies.
    Wood has publicly backed Trump's economic platform, arguing
that his plan to unleash deals, promote innovation in crypto and
artificial intelligence, and cut red tape and government costs
will make life easier for corporate America. 
    Tax policy was also central to the election race, with Trump
pledging to cut the rate paid by companies that make goods in
the United States and to extend individual tax cuts Congress
passed in 2017 that are set to expire next year. 
    That's a key area where Wood said she's pushing for more
clarity. 
   "I see them saying, okay, we're going to cut taxes but we
will make them retroactive to Jan. 1, 2025. That would be very
helpful, I think, in terms of providing certainty for the
markets," Wood said in an interview.
    "If they don't, you're going to get companies and
individuals perhaps holding back. ... I'm trying to communicate
that pretty regularly to anyone who will listen."
    While Wood said she does not generally support tariffs,
which act as a tax increase on goods, Trump's threat to hike
them on major trading partners appears to be a negotiating
strategy. 
    
    TAX REFORM
    Analysts expect the new Republican-controlled Congress to
pursue tax reform next year, but Trump will kick start other key
policies with executive orders upon his Jan. 20 inauguration. He
has also announced new regulators who can start to implement his
pro-innovation agenda. 
    Campaign finance records indicate that Wood did not
financially back Trump in the 2024 election cycle. 
    She told Reuters that she has only met Trump once, earlier
this year at his Florida home, but is in contact with Tesla boss
and billionaire Trump backer Elon Musk and crypto enthusiast
Wyoming Republican Senator Cynthia Lummis, both of whom are
helping to shape Trump's policies. 
    Wood has been one of Musk's top cheerleaders, investing 16%
of ARKK's $6.4 billion in assets in Tesla. That oversized bet
reflects her confidence in Musk and her conviction that AI,
including autonomous vehicles, will be a major driver of
investment returns going forward, she said.
    "He understands that technologies are converging, that
artificial intelligence is the biggest catalyst," said Wood. 
    However, she is selling some Tesla shares to reinvest in
other companies likely to benefit from the same trend, like
Archer Aviation  ACHR.N , a developer of autonomous aircraft.
    Florida-based ARK has also been a leading proponent of
crypto, launching a spot bitcoin ETF in January. Wood said a
crypto crackdown under President Joe Biden put the United States
in a vulnerable position, but the new administration "will not
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 issues
related to innovation."
     Although some of the market exuberance over Trump's victory
has fizzled, Wood said she believes the Trump bump, which has
benefited crypto, small-cap and financial stocks, will
eventually spill over into more of the market.
    "I do think ... that the market is going to continue
broadening out. It'll definitely favor innovation and anything
that has been held back by policies in the last several years,”
she said.
    Neither Musk nor Trump's transition team responded to
requests for comment. 
    
    'CONTRARIAN PATTERN'
    Wood's outsize bets on stocks like Zoom  ZM.O  generated a
152% return at the height of the pandemic and won her a huge
retail investor following but she has struggled to sustain that
outperformance. 
    Investors have pulled roughly $3.5 billion from ARKK over
the past two years, with $300 million flowing out in the past
month, according to data from Morningstar and VettaFi.
    "That's an atypical pattern for most ETFs and mutual funds,
but typical of the contrarian pattern we've seen for Cathie
Wood's funds," said Robby Greengold, a Morningstar analyst.
    Wood said that even the most favorable new policies won't
end that volatility. 
    "We're telling people that, hey, we offer a highly
differentiated exposure to innovation." As a result, she added:
"yes, we're going to be volatile."

 (Reporting by Suzanne McGee; Additional reporting by Douglas
Gillison; Editing by Michelle Price and Mark Porter)
 ((Suzanne.McGee@thomsonreuters.com; 917-285-4385;))