“Ark Invest” is a money management firm that manages money in ETFs, mutual funds, and separately managed accounts. Ark believes that innovation is the key to growth and alpha. Consequently, ARK focuses on disruptive innovation and offers strategies to investors who seek to capture long-term capital appreciation and alpha. Ark’s CEO and chief investment officer is Catherine Wood, who is one of the best thematic investors I know. I met her years ago while attending one of her weekly strategy sessions where she and her team discuss all sorts of investment themes/ideas. I recalled something Catherine wrote a few months ago. To wit:
This explanation of the flattening yield curve seemingly suggests that “This time is different,” but this time is not different in the context of technologically enabled disruptive innovation. During the 50 years ended in 1929, the last time that three or more general purpose technology platforms were evolving simultaneously, the yield curve was inverted more than half of the time. The disruptive innovations of that time – the internal combustion engine, telephone, and electricity – stimulated rapid real growth at low rates of inflation. Through booms and busts in an era without the Federal Reserve and with minimal government intervention, U.S. real GDP growth averaged 3.7% and inflation 1.1%, while short rates averaged roughly 4.8% and long rates 3.8%. The yield curve inversions were steepest during periods of most rapid growth. So this time is not different, but investors do have to extend their time horizons to understand the impact of profound technological breakthroughs on economic indicators.
My friend, and portfolio manager for the HugganWhite Wealth Management firm, namely Craig White, emailed me last Friday with this quip:
Hey Jeff, nice week, nice month and an even better Q1. Despite the unrelenting pessimistic verbiage, the backdrop remains pretty decent based on our work; no recession on the horizon, a yield inversion that is getting WAY too much attention (see our latest commentary), an earnings outlook that is too bearish in our opinion and sentiment that is far from greed or euphoria. As such, the underinvested continue to feel the heat as the grind higher resumes . . . look for a more detailed update over the weekend.
Nice week, nice month and an even better Q1 indeed. I began last week thinking the first part of the week should be soft with strength surfacing in the back half of the week. I modified that “call” mid-week because the indices were unable to hold on to their gains during a few of the trading sessions. Accordingly, I thought the equity markets would continue to stall into this week when end of quarter window dressing would be over. In retrospect, I guess that wasn't such a bad call because on Friday, March 22, 2019 the S&P 500’s (SPX/2834.40) intraday high was at ~2846 and last Friday’s close was at 2834.40. So, for someone who slept through the week it would appear that nothing really happened. Of course that was not the case.