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Marsh Representative
At Marsh, we believe that perspective powers progress. That's why our individual businesses have come together as one company, a new Marsh built to solve the world's most complex challenges and uncover new opportunities for our clients. We're better positioned than ever to help your business navigate obstacles and unlock potential across risk, reinsurance and capital, people and investments and management consulting. Learn more@visitmarsh.com podcast. Bloomberg Audio Studios Podcasts Radio news.
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Carol Massar
You're listening to Bloomberg Business Week with Carol Massar and Tim Stanvak on Bloomberg Radio.
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Tim Stankus
Well, 2026, as you know, often running follows three years of double digit gains for the S&P 500, a total gain of around 80% over those three years. Three years of back to back gains as well. That's the s and P3 years of back to back gains. Also for the NASDAQ 100, a total gain of about 130% there. And yet, even with the stock market gains in the U.S. in 2025 last year, measured against equities worldwide, minus the U.S. stocks have risen around 30%, roughly double the S&P 500's gain. That's according to the MSCI's index. Here to talk about 2026, the economy, investment ideas. Great to have. Back with us, the founder, CEO and CIO of Ark Invest, Cathie Wood. She joins us from St. Petersburg, Florida. Kath, to have you here. Happy New Year.
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Cathie Wood
Happy New Year, Carol and Tim, very happy to be here again.
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Tim Stankus
Well, it's great to have you here.
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Cathie Wood
And I want to start with what.
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Tim Stankus
Stocks did here in the US really well last year. But if you look at global stocks, you could say that there was certainly some underperformance by the U.S. you've invested in a lot of U.S. names, but also a lot outside the U.S. and I think about Chinese companies, BYD, Baidu, Alibaba. Are you looking for more opportunities outside the US at this point or and I wonder if you think it's time for maybe US Stocks to take.
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Cathie Wood
I think, I think we're very focused on the deregulation, lower taxes and what we believe will be lower inflation, much lower inflation and lower interest rates in the US and we think that the combination of those is actually going to drive the returns on invested capital in the US up relative to those in the rest of the world. And I think many people are underestimating, especially on the corporate tax side, that thanks to the new depreciation schedules, our effective corporate tax rate, not not the statutory but the effective will drop to one of the lowest in the world at roughly 10%, certainly near a record low for the U.S. so do you.
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Carol Massar
Think Kathy, that's not priced in yet to US equities? Like have investors not realized that and therefore it's not priced?
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Cathie Wood
You know it's is very interesting maybe a lot of your guests have been talking about the depreciation schedul how, how massively they are going to encourage capital investment here in the United States. So we've never had full depreciation in year one of manufacturing facilities, full depreciation in the first year of service. That means corporations will get huge tax refunds that they will be able to reinvest into innovation because we also equipment, domestic R and D and software. Those three full depreciation, first year of service that has been legislated. Normally we get oh a few years of this, you know, this cut and that cut, but that has been legislated. Now it's all the time. So we don't think people understand how profound some of these tax changes are.
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Tim Stankus
So what does that mean for something like the AI trade specifically Kathy, where I think people are worried about pockets of it with you know, being in a bit of a bubble. Does it benefit everyone who is somehow associated, whether it's the chip companies, whether it's the energy companies? Do you see the benefits playing out there and giving it more room to move to the upside?
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Cathie Wood
Absolutely, absolutely. I mean we're having huge build outs of data centers and power facilities. All of that, all of those depreciation schedules will apply to this boom in investment and contribute to it. So yes, anything in fact. Carol. Yeah, yeah, I was just going to say many people think we're in a bubble and yes, the data center spending last year was about $500 billion. And you can see all of this in our Big Ideas report. We just released it yesterday and thank you Bloomberg for featuring it. But $500 billion is a 2 and times increase from where it had been trending for years. So big increase, no doubt about it. But we think that number needs to go to 1.4 trillion in the next five years to accommodate the AI boom that is now underway and is going to drive productivity gains incredibly.
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Tim Stankus
I want to get into that in just a moment. I'm really also piqued or interested in the health care aspect of it because I feel like there's a lot going on before we do. So you we also have your 2026 outlo and what's interesting is you note that this is an important economic historical moment. How so?
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Cathie Wood
Well, we are in A technology revolution. And many people thought that the Internet was a technology revolution. And to some extent it was. But today, instead of just one major platform evolving, we have five so robotics, energy storage, AI blockchain technology, and multi omics sequencing in the life science space, which might, which we believe is the most profound application of AI health care. And so this boom, if you look back at the railroad boom, the amount of investment that, that, that we saw back then was about 6% of GDP at its peak 5 to 6%. The Internet boom was more like the auto boom in the early 1900s was more in the 3 to 4% of GDP range. We believe this, this five platform innovation strategy or boom is going to move to 12% of GDP. And we do believe also that productivity growth will accelerate to the 4 to 6% range and be sust there. Normally we see a cyclical peak around there and then it falls back. We think it will be sustained. And we think that by the end of this decade, real GDP growth could be averaging more than 7% per year. And I know that sounds shocking given that We've been at 3% for 125 years, but it is the history associated with technology revolutions. A step change up in GDP growth.
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Carol Massar
The productivity increase, the GDP growth that you are forecasting as a result of these disruptive technologies, to what extent is that the result of fewer people doing more? My question is about job losses as a result of this technology. Because if everything that investors are betting on when it comes to this AI revolution comes true, it means that companies aren't going to need as many people to do a lot more. What does that look like?
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Cathie Wood
Well, GDP growth at 7% plus per year tells you there's going to be a lot of economic activity, more economic activity from a sustained growth point of view than we've seen in quite some time. The history of technology is it's a net job creator. In the early 90s when developers were evolving the Internet, we, we could not have imagined Uber or Airbnb back then. And I think the same is true now. We cannot imagine the kinds of jobs that are going to exist in the future. And the other thing that we're excited about from a job creation point of view is we're seeing new worlds being created. And by that I mean most of us think about Earth, but now we're moving into space, even data centers. We think Elon leading that charge will start moving into space and we won't have the not in my backyard. And the bureaucracy associated with data centers there are going to be there's going to be huge job creation around the space exploration and all of the opportunities out there and then the other one. And you'll find this in our digital Assets section of Big Ideas. Is the digital world immutable? Private property rights? We know from economic history the best way to lift people and countries out of poverty is with private property rights that are immutable. Well, that is now moving into the digital world for the first time thanks to blockchain technology. So we're not worried about job creation but for those who are, because there is something happening that I know is concerning to many people. The, the unemployment rate for 16 to 24 year olds has moved to 12%. 12% big increase. And what is that saying? That's saying that entry level jobs are not being created the way they used to be. To those people I say, you know, you must have in your mind an idea for a new business, something that frustrates you, an unmet need. Well now you can go to ChatGPT, you can go to Grok and you can have an assistant help you build out that business. Just interview for jobs, but also think about new business ideas. I think we're going to see entrepreneurial explosion here.
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Tim Stankus
Well, and you know, speaking of entrepreneurial explosion, I think about, you know, how long you have certainly been with Tesla and a backer of Elon Musk. A long time. And I think about, you know, when we first talked and you likened him to, to Mr. Einstein, Albert Einstein. But I just wonder, Elon at Davos earlier today and he talked about the carmakers fortunes will be increasingly dependent on humanoid machines. Kathy, how are you modeling this? I mean into the thesis of Tesla. And is that where the growth is More so than EVs for Tesla going forward?
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Cathie Wood
Without a doubt. We've always said Tesla is not an auto company. It is actually the convergence of three of the platforms I mentioned. So robotics, energy storage and AI. Each one of those technologies has its own S curve and now they're feeding each other and we're seeing that in robo taxis. Robo taxis we believe will account for 90% of Tesla's valuation by the end of the decade. We're in print at 2600. That includes nothing for Optimus robots. And we're beginning to understand how quickly Tesla is moving on that front. Why? Because it's the convergence of the same three technologies, robotics, energy storage and AI. So I think that price target obviously if, if Optim miss is successful and, and we believe it will be, we think that humanoid robots is evolving into a $26 trillion opportunity, half in the home, half in, in manufacturing plants.
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Carol Massar
Cathy, we're speaking with Cathie Wood, CEO and CIO of ARK Invest. Kathy, you mentioned Tesla. We're talking about Tesla, the regulatory environment. Certainly it's a less favorable regulatory environment for Tesla than it was just a few years ago. Just two years ago, just one year ago. You also talked about the Trump administration and the ease of regulations that we're going to see through the Trump administration. You've talked about that with us in the past. I'm wondering, a year into his presidency, what do you still want to see in terms of deregulation? What have you not seen yet that you want to see?
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Cathie Wood
Well, I think it's constant chipping away. In his first administration, I think. I think President Trump said for every regulation you put in place, you have to take away two. And so it's a mindset in this administration, and I think we have it. We're seeing amazing deregulation in the health care, on the health care front. And I don't think many people understand that the FDA has decided that animal testing is no longer necessary for monoclonal antibodies. And I don't think they're as aware of how the FDA is harnessing AI itself and encouraging the companies it regulates to start using AI. So I think it's a mindset shift, and I think it is happening. I think the most profound deregulation is taking place in the energy realm. And that's not just oil and gas and so forth. It's nuclear. If we in the 70s had not started regulating nuclear the way we did and driving construction costs up, electricity prices today would be 40% lower than they are. And so we think as nuclear comes on stream, that it will serve to take some of the edge off of the increase to electricity prices that data centers are causing now.
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Tim Stankus
Hey, Kathy, just big broad in terms of, you know, all of the different funds that you have in the exposure. I'm just curious where you're seeing flows in and out. We've done some reporting on this, and we know some of your funds certainly showing some interest among investors. But we also talked about earlier this week about some of the withdrawals from the ARC innovation. What can you tell us specifically when it comes to flows in performance? So so far this year, what's working? What are investors interested in?
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Cathie Wood
Well, we have had year to date, I think ETFs have roughly $1 billion in inflows heavily skewed to space exploration and defense for obvious reasons. And then autonomous technology and robotics. I think that autonomous taxis and drones, very big parts of that fund as well. And then our flagship strategy is also starting to inflow. It had been held down by the multi omics theme. So this is what we used to call the genomic revolution. And it was a very difficult space. Even though the, even though the innovation was taking place, the investment markets were not interested in it for a couple of reasons. One, lots of investment necessary, therefore not, not very high, if any cash flows and, and the cash cushions needed to, to be built up. We think they've done a lot in the last few years to become more efficient. And so we're beginning to see outperformance from that space as well because now many people are beginning to understand we're seeing cures to disease, we're seeing early diagnosis thanks to AI and sequencing technologies.
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Tim Stankus
I want to pursue this further with you at a later date and some of the companies that are that just 30 seconds. So what's your best idea, you think for 2026 at this point? And I know there's a lot in your, in your research, but is there a best idea or narrative? Just quickly if you could it.
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Cathie Wood
Well, so the top three stocks in our flagship are Tesla. We think it has miles to go. We do take profits from time to time, but it could break out here in a big way. As more and more analysts do their homework on Robo Taxis, Crispr Therapeutics has moved into the second position. That company is curing sickle cell disease and beta thalassemia and has its eyes set on not just rare diseases, but curing the bad cholesterol problem, especially for those who have hereditary issues in that realm. That could be an enormous market and I don't think anyone is doing the modeling work there. The way we are.
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Tim Stankus
I love it. All right, hopefully we can check back with you as the year plays out. Kathy, thank you so much. Really appreciate it. Cathy Wood, of course, be well for former CEO, former founder, CEO of course, and CIO of Ark Invest, joining us.