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Ark Invest founder Cathie Wood says the U.S. economy is inching toward a powerful liquidity wave as tax cuts, artificial intelligence (AI) investment, and falling rates set the stage for what she views as a new bull market.
AI, Tax Cuts and Capital Spending: Ark Invest’s Wood Says the Recovery Is Already Here
In the latest episode of Ark Invest’s In the Know, Cathie Wood mapped out a sweeping economic outlook built on expanding liquidity, falling rates, and an AI-driven productivity boom — and she made clear she expects the results to be visible well before the midterms.
Wood opened by describing the U.S. as “at the threshold of an increase in liquidity,” pointing to the convergence of fiscal stimulus and softer monetary policy. “If this administration wants the economy to be in really good shape by the time of the midterms, they really have to start providing the liquidity now,” she stressed.
With the budget deficit narrowing and tax relief ramping up, she argues consumers are about to see a meaningful boost. Disposable personal income, she noted, could jump to an 8% real annualized growth rate once tax cuts take effect. A key theme throughout her analysis is the widespread misconception that stronger growth must fuel inflation.
Wood took aim at that idea directly: “Many people assume that growth means inflation. That’s absolutely wrong,” she said. For her, the convergence of AI, robotics, energy storage, blockchain technology and life-science innovation will unlock extraordinary productivity gains — and those gains, in her view, act as structural deflation.
Still, affordability remains the political Achilles’ heel. Wood warned that U.S. consumers are squeezed by food prices sitting 16% above trend, even as gasoline offers modest relief. She expects the administration to be judged heavily on prices for food, housing, and energy — but she also believes housing may become the biggest upside surprise in 2026.
Mortgage rates have begun drifting down, new-home inventories are high, and pricing pressure is softening. That combination, she argued, could unlock long-delayed mobility for millions of homeowners trapped by historically low mortgage rates. On monetary policy, she highlighted growing consensus around lower rates — and even sketched the likely path of the next Fed chair.
Kevin Hassett is the top contender, she said, though Chris Waller sits close behind. Both, she noted, publicly support lower rates and believe easing will not reignite inflation but instead strengthen real productivity. Liquidity conditions, once constrained by quantitative tightening, are already shifting as Treasury cash balances unwind and capital spending reaccelerates.
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She described the recent pickup in investment as a potent validation of tax incentives attracting new corporate spending. Global deflationary currents also featured prominently. Wood sees China exporting deflation as its domestic economy struggles, pointing to its massive $100 billion monthly trade surplus as evidence. Meanwhile, commodity signals — including an unusually depressed metals-to-gold ratio — reinforce her read that inflation pressure is ebbing, not building.
Even gold’s multi-decade highs don’t sway her: historical downturns following the 1980 and 2011 peaks, she argued, show how quickly the metal can fall once growth expectations shift. To close, Wood circled back to innovation — particularly AI — as the defining force shaping economic mobility.
With coding tools now accessible for as little as $20 a month, she urged young workers and jobseekers to seize this moment. “Describe the kind of business you want to form and prompt it along the way,” she encouraged, framing AI as an entrepreneurial equalizer. For Wood, the message is clear: productivity, not inflation, will steer the next cycle — and she believes the market is only beginning to recognize that.
FAQ ⏰
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What economic shift does Cathie Wood expect next?
She anticipates a liquidity expansion driven by tax cuts, easing monetary policy and rising capital investment. -
Why does she believe inflation will fall as growth strengthens?
Wood argues productivity gains from AI and other technologies create deflationary forces that offset price pressures. -
What sector does Wood think may surprise markets in 2026?
Housing, due to falling mortgage rates, high inventories, and improving affordability metrics. -
How does Wood view the global backdrop?
She highlights deflationary exports from China and subdued commodity signals as reinforcing lower inflation trends.