Cathie Wood’s Ark funds have been feeling extra pain at the hands of the recent Trump correction (or crash for portfolios that are heavily invested in high-multiple tech stocks), but that hasn’t stopped her from buying the dip. At its worst, shares of Wood’s flagship Ark Innovation ETF (ARKK) tanked close to 40% from peak to trough.
Cathie Wood is buying this dip. Should investors follow suit amid Trump tariff tremors?
In any case, Wood isn’t letting this latest stock market sell-off go to waste, even if it feels a bit different this time due to the man-made nature of the decline. In recent weeks, she’s been picking up a few high-growth names from the wreckage. Notably, Wood picked up shares of promising AI chip plays Nvidia (NASDAQ:NVDA | NVDA Price Prediction) and AMD (NASDAQ:AMD), as well as crypto juggernaut Coinbase (NASDAQ:COIN), on recent tariff-fueled weakness. At 25.3x, 21.7x, and 27.4x forward price-to-earnings (P/E), respectively, these growth stocks are starting to smell of value.
Either way, Wood is no stranger to crisis-level volatility and catching falling knives. Time will tell if her most recent bets prove timely (many retail investors have also been braving the Trump slump), I do think she’d welcome a further decline in the value of the stocks on her radar. At the end of the day, Cathie Wood is a long-term investor who’s unlikely to get seasick as larger waves rock her ark.
While there’s a ton of risk associated with buying tech plays that have been in the “blast zone” of the latest market-wide plunge, there may also be the most rewards, given the market’s potential to turn on a dime if Trump calls off most tariffs once the economic pain becomes a bit too unbearable.
Get used to heightened volatility.
Although buying in the face of Trump’s tariff threats is a recipe for near-term pain, sticking with the best-in-breed tech titans could prove a winning strategy, especially once AI developments become more newsworthy than tariff chatter and catastrophizing headlines about how bad things could get. At the end of the day, investors will encounter all sorts of recessions, both man-made and otherwise, as they invest for retirement.
The occasional economic downturn really par for the course and should be prepared for accordingly. For the young and the brave, perhaps this entails buying the dip in generational growth stocks (like Nvidia) that are riding on profound and powerful secular trends (AI). And for the retired and cautious, perhaps rebalancing and rotating into defensives to best ride out the storm, if the best move
Either way, Cathie Wood’s Ark is built for growth-minded investors who won’t lose their cool on any given day when the Dow Jones Industrial Average plunges or soars by more than 1,000 points.
The bottom line
The Trump tariff war is bound to pave the way for more quadruple-digit point single-day swings in the Dow. ARKK is bound to exhibit far more turbulence than the S&P 500 (2.04 beta, entailing amplified volatility), I do think Wood’s dip-buying may make her funds violent upside movers once the tides do turn. In any case, I view ARKK as unreasonably oversold and perhaps suitable for young investors who still seek to go for growth and are willing to play the long game, even if it means enduring amplified near-term pain.
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