Cathie Wood Says Trump's 'Shock Therapy' Tariff Policies May Have Been Necessary

Ark Invest CEO Cathie Wood brushed off concerns that President Donald Trump's tariff policies could cause economic and geopolitical disaster in a weekend note on the high volatility the stock market saw last week.

What Happened: Wood regularly comments on Ark portfolio names with 15% weekly moves, and in light of last week's market turbulence, she used the opportunity to weigh in on Trump's latest tariff policies.

"While many observers fear that the Trump tariff policy is a recipe for economic and geopolitical disaster, we believe that what looked at first glance like the largest and most regressive tax increase in U.S. history could turn out to be quite the opposite," Wood said.

Wood said that Treasury Secretary Scott Bessent taking the lead on negotiating with allies could lead to "lower tariffs and non-tariff barriers."

"Neither of which would have been possible without the shock therapy that President Trump administered," Wood said of the potential for lower tariffs.

Wood highlighted in her note that Tesla CEO Elon Musk has been a "strong advocate" for this solution to tariffs and non-tariff trade barriers that have evolved in the last 50 years.

Why It's Important: Wood notes that Trump's tariff policies have caused high volatility but are likely setting things up for a strong second half of the year.

"Our working assumption was that President Trump has been aiming for robust economic growth and a strong stock market during the second half of this year, ahead of the midterm elections next year," Wood said. "How many times this week did he mention that the economy and stock market are going to boom!"

Wood said that prior to the recent tariff-driven volatility, Ark Invest had been anticipating strong growth in the second half of 2025.

"We do believe that the last leg of a three-year rolling recession will result in negative Gross Domestic Product growth for the first and second quarters."

Wood said that the interest rate shock that started in 2022 and the government’s efforts to prop GDP up are giving way, leading to the government's first recession in 30 years.

"The Administration and the Federal Reserve will have more degrees of freedom to stimulate than most investors have been expecting. Now that much of the economy has seized up in response to the fear of tariffs, the drop in activity is likely to be more severe than otherwise would haven the case, a clarion call for tax cuts, deregulation, and lower interest rates."

Price Action: The flagship Ark Innovation ETF ARKK trades at $46.80 on Monday. The ETF is down 18.5% year-to-date in 2025 and up 1.0% over the last year. The ETF was up 11.1% over the last five days.

The Ark Next Generation Internet ETF ARKW trades at $94.30 on Monday. The ETF is down 14.1% year-to-date in 2025 and up 19.2% over the last year. The ETF was up 7.5% over the last five days.

The two largest Ark ETFs have trailed the year-to-date performance of the SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500 Index. The SPY ETF is down 7.5% year-to-date in 2025 and up 6.2% over the last year. The SPY was up 7.5% over the last five days.

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