Bonus: Cathie Wood Says the Trump Era Is Reviving Corporate Risk Appetite
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It's me, Stephanie Flanders, host of Trumponomics, and we're bringing you a bonus episode this weekend. It's a conversation I had earlier this month on June 12th at the Founders Forum event held annually at the Soho Farmhouse in the English Cotswolds. The conversation features Cathy Wood of ARK Invest and the editor-in-chief of Bloomberg, John Micklethwaite, and Lizzie Burden, Bloomberg Television's UK correspondent.

A lot has happened since we recorded the conversation, but we discuss wider themes around investing that I think are still timely and relevant. Cathy particularly shared her thoughts on China's competitiveness, the UK's missed opportunities, and whether we were looking at the end of US exceptionalism.

Bloomberg Audio Studios. Podcasts, radio, news. I do think there is some rebalancing of portfolios and it makes a lot of sense.

I'm Stephanie Flanders, Head of Government and Economics at Bloomberg, and welcome to Trumponomics, the podcast that looks at the economic world of Donald Trump, how he's already shaped the global economy, and what on earth is going to happen next. And we're recording this episode from Britain's most high-end tech event, I like to think of it,

Founders Forum. Some of the biggest names in European tech, even some Americans have been cited here at Soho Farmhouse alongside politicians, former politicians and pioneering investors. But I am always interested in how Trumponomics is not only changing the global economy, which we talk about a lot on this podcast, but changing the way the

The world looks to people who make money and manage money. That's going to be the focus today. You know, there's been enormous focus on the trade war, headlines, massive volatility in the markets, definitely damaging for the global economy short term. But if you actually step back and think, you know, what else has happened?

in the world as a result of Donald Trump's economic policies. Since the start of the year, dollars gone down quite a lot. The rest of the world's assets have become, I would argue, more attractive relative to the US than they were

And if you'd asked a lot of people in the markets in the last few years whether any of those things were good, they would say yes. They would say they actually would be healthy things that we quite wanted to see. We'd been hugely dependent on the US for driving returns, for driving global economic growth. The dollar was pretty strong for all that time, was potentially having a distorting effect on many different trades. So I think you can sort of step back from the

hysteria and some of the many things that people are worried about to say, okay, there's some good things here. And maybe this is a time where there is going to be more interest, more focus on other markets and particularly Europe and the UK. That's the question we had for this episode. You know, are we in a sell America world? And I guess related to that, you know, what would it take to buy Europe or, you know, heaven forbid, buy the UK? So

So to weigh in on this, we have Cathy Wood, Founder, Chief Executive Officer and Chief Investment Officer of investment management firm ARK Invest. And to be part of the back and forth, Lizzie Burden, Anchor and UK correspondent for Bloomberg TV and John Micklethwaite, Editor-in-Chief of Bloomberg. So Cathy, we start with you and you're well known for always having a strong view, not always the same as everyone else's. Should we be selling America?

Well, it's very interesting, and especially to be here for the last week, effectively, and watching Bloomberg, of course, and listening to how many people are asking and suggesting that American exceptionalism is done. And I

I don't know the answer to that, but here is what I will say. The way they validate the observation is the dollar is going down. And I understand that because the dollar is quite impactful as the world's reserve currency. So if you look at the long term of the dollar, yes, we're down 10% year to date.

But if you look at where we started after 08, 09, I think we bottomed at 70 on the trade weighted dollar DXY. And we're at 100. So we're still up 40%. And if you put it in the context of long-term history, we're at the middle to higher end of the range that has been in place for years. So that's the first thing.

I don't agree that the dollar is telegraphing that America has lost its way. I do understand why there has been a correction for all the reasons you say. It seems like

like we're in utter chaos in the US with trade wars and even closer to us, the Trump-Musk drama that we've been through. I do think there is some rebalancing of portfolios and it makes a lot of sense. Our valuation levels in the United States are much higher than elsewhere in the world.

But there is another phenomenon that I think in saying that the U.S. was taking all of the oxygen out of the room, that did not take into account that really it was what we ended up calling the Mag 6. So take Tesla out. The Mag 6, we have never seen concentration like this before. So yes, there's a rebalancing away from the Mag 6. And why is that?

It is because, you know, after building cash hordes, because they weren't allowed to make any acquisitions under the last administration, so they didn't need to compete with one another to buy other companies. Now we're seeing a rush. And we've heard scale AI for meta platforms at a $10 billion valuation. And we are seeing massive capital spending out of these companies,

The investor base in those companies, they were looking for safety. This doesn't feel as safe anymore. So I think there's a rebalancing, thank goodness, a rebalancing towards other exposures to innovation. Just to come back on that a bit, I guess a lot of people would be surprised that...

You're talking about it as a sort of long overdue adjustment and correction somewhat in terms of the balance between the US and the rest of the world, but also within the US market where you identify those massive concentration. A lot of people look at the US and say, look, there's a reason it's been doing so well all this time. It's had these underlying competitive advantages that you've seen even come through post-COVID in a way that a lot of other countries haven't seen, which are being undermined by

by Donald Trump's policies, whether it's the research infrastructure and the funding for basic research that we've seen slashed, the soft power associated with the centers of educational excellence, the openness to foreign talent. You're untroubled by any of that. So I think there are puts and takes. So again, back to the dollar. I actually think the dollar is going to continue to move up.

And the reason I say that it's... You mean start to move up because it's been moving down. Well, I'm going to continue from that low, the 70, right, to 100, to 110, back to 100. And I think it is because there's a lot of controversy and argument on this point. So returns on invested capital, what will they do in the United States relative to the rest of the world?

I think they're going to go up, but not 100% sure because I think other countries have massive opportunities now to capitalize on the biggest wave of innovation in history. Five innovation platforms, robotics, energy storage, artificial intelligence, blockchain technology, and then multi-omic sequencing in the life science space.

And this is open for all. And I love to hear what I've heard here in the UK this week about a focus on, you know, getting into the game in a big way. Your educational institutions here are incredible institutions.

Your AI stripes, I mean, DeepMind came out of the UK, Arm and others. So what I love about this environment is the competition is open. Let's see who wins. But I do know in the United States, why might things get better for us? As I said, I don't think they've been that great over the last four years.

five years. And the reason is this concentration suggested to me, flight to safety, cash, and okay, maybe they'll be involved in this AI thing. That's what that was. Now I think there's more risk taking. Why is that? Number one, deregulation. We've been strangled by regulation. That is happening at the most provocative

deregulation that we're seeing right now is in healthcare, which is shocking. It's actually very exciting. And I think tax cuts

Keeping the tax rates down and getting the corporate tax rate effectively down from 21% to maybe 14% by allowing full expensing of capital spending in year one, I think will also be very important. So I think that's good.

I also think that competition is really good for America from China, from the UK and from Europe. So I think this will be a good thing. And we're at our best when we're competing. And I think the last thing is many of the cutbacks you're referring to are involved with the public sector itself.

And deficit is a percent of GDP, six and a half percent. What they're trying to do is stop the crowding out of the private sector. So let's see what happens there. It seems to be basically, I think there's a lot of faith in those companies that aren't in the MAG.

or Mac 7. And I just wondered, what kind of names are they? Because everyone's made so much money historically by being with Meta and whatever. Now suddenly, if you're right, and those are being sidelined a little, what are the sort of names that you would see in this new wave of American innovation? Yes, well, one of the things that

during the last four years is we almost lost our crypto, and we should start saying digital assets a little bit more to make it a little more understandable, but to the rest of the world. And it's coming back now.

So in the top 10 of our flagship ARKK, we have both Coinbase and Circle. So digital wallets, I think, are going to be a huge opportunity because this digital asset revolution has just started. So definitely crypto is a big wave. Our highest position is Tesla. We think Tesla is the largest AI project on earth.

And not just because of robotaxis, but because of humanoid robots. And then I would point to Tempest AI. We think this could become the healthcare information backbone of the United States. And then CRISPR Therapeutics, which actually technically is headquartered in Switzerland, is now...

Deriving revenue. Many people think what I'm about to say is going to happen in five years. It's happening now. It is deriving revenue from curing sickle cell disease and beta thalassemia. Let's just let Lizzie come in. Where you were talking about crypto, I'm fascinated what your view is, because I wondered when the president is favoring crypto, is he hurting the dollar?

I actually think that Bitcoin in particular will discipline our monetary authorities a little bit like gold did during Chairman Volcker's and Chairman Greenspan's and maybe even Bernanke's time. But what's also interesting is if you look at stablecoins, which are really the gateway or the on-ramp

the decentralized finance world or the internet financial system, what are they backed by? They're

They're backed 100% by Treasury securities in the case of Circle, largely by Treasury securities at Tether as well. So that's a demand for dollar-based assets that most people didn't expect to be there. It's about $250 billion now, and it's just started. John, let's get on to the Europe side of this because, in fact, Cathy mentioned that there's a potential for some competition in some of these markets.

highly innovative fields and growing areas. Do you feel Europe or the UK has the potential to do that? I think what has been noticeable so far is you could see to some extent America from a kind of geoeconomic point of view almost doing what you would not want to do, what it used to do to other countries.

where you sanction countries like Iran by stopping them being able to import things, stopping people going there. America is now, to some extent, doing it to itself in the same way as Britain did with Brexit. If you sanction yourself normally long term, that's not a great thing. The interesting thing, I think, to me is that the fact that Europe has not kind of picked up that challenge. If you look at something like university graduates, for instance, you would imagine that

At the moment, the cream of graduates, probably people in this audience, either them or their children, everyone wants to go to American universities. Stephanie and I were in Qatar last week. Suddenly everything has changed. People are scared of that. And yet what's rather remarkable is if you look at the European countries, you look at Britain, there hasn't been a thing saying, for God's sake, come here. Not in the same kind of public way that you might expect. Slightly more from Canada.

I think that's true of various other things, especially within the European Union. You've still got a variety of people arguing about whether you have a banking union, which most people would expect is the bare minimum. These are all things that people have spent 15, 20 years arguing about within Europe.

People like me expected there to be a wake-up call to Europe, but it hasn't so far. Outside military spending, it hasn't really come through. Lizzie, you spend quite a lot of time as a UK correspondent. I see you often standing in 10 Downing Street. In the rain. And this week, there's been these two quite distinctive big events. There's us hosting these trade talks that everyone was paying attention to between the US and China.

And then the Chancellor having her big day yesterday with a spending review, this government would say they're starting to address

long, festering structural problems, whether it's planning and other things. They're also saying quite a lot of, at least there's been lots of good music about investing in tech infrastructure and just energy capacity, probably not enough. Do you feel when you're sort of, does this feel like a country that's kind of getting its act together on some of these fronts? Yeah. Is it nice mood music or is it just nice noises?

When you have the US-China deal, to go back to that, not deal, but it's not a decoupling, but they've made up for now. There's always the chance that they don't get on again

And that this only lasts for a few weeks. So we put that to one side. Then we look at the UK. We had the prime minister on day one of London Tech Week announcing that billion pounds of spend on compute. Nick Clegg earlier on this stage was saying to me, Microsoft spends $80 billion of the same thing in one fiscal year. It's kind of chicken feed.

When you look at the ideas that are coming out from the government in terms of growth, yes, they're fiscally squeezed, but you've got a lot of people saying they spent 14 years in opposition. Could they not come up with anything more radical to boost the economy, to get that growth, to get that investment? So I think that there's a sense of disappointment, actually, but there is an effort to do the right thing. I mean, Keir Starmer, the globetrotting dealmaker, said,

first in line, actually, at the White House to get this trade pact with Donald Trump. But is it meaningful? I mean, Cathy, yeah, you can see this. We're very good at laying into the US, but then actually we're also quite, as some have said, we feel sort of excitement about our own failings as well. We're very happy to dwell on our bad weather and our bad failings, even as we point holes in the Trump policies. So what's your response to this sort of

Wave of negativity. Wave of negativity. Well, the first thing in terms of Europe, and then I'll do UK, but Europe passed, I don't know if you pronounce it, Mika or Mika here, in adding some clarity to Europe.

crypto or digital assets regulation. So I thought that was a very interesting and important step in this world, which is going to transform the financial system. So that's good. And I also do believe that half of the solution is understanding the problem. And as I go around Europe,

which I think regulation is a problem there. Just to come back on that, people like Stephanie and me, this is much younger, have been wandering around seeing European prime ministers for 20 years. If you drew up a list of the problems over regulation, no integration,

They've understood the problem for years. They've just been totally unable to work out a way to deal with it and get elected. And it is why a company like Palantir has said, we're pulling our employees out of Europe because the demand elsewhere is so great. And they're tied up in knots, you know, regulatory knots. And, you know, it's just not going to be productive. I do think, however, this...

move towards increased defense spending, which involves massive technology, is going to create a wave of innovation out of necessity. And I think that's a very good thing, and they're all united on that. And I think Germany agreeing to, what is it, 3% of GDP, very important from a tech point of view, which is my lens.

In terms of the UK, I must say I watched serendipitously the interview between Prime Minister Starmer and Jensen Wong. And I found it very interesting the way that your prime minister started with health care, which in the United States, you know, most VCs have found that a very difficult place.

Here, you're opening it up in a very provocative way. And NHS is known for being progressive in terms of longitudinal data. And data is the name of the game in AI.

So I am more optimistic. I did want to ask you, I just got back from Hong Kong and I talked to quite a lot of investors and others and it sort of strengthened something that I'd been thinking over the previous few months, which is when you ask people, and I did it, you ask people what's the thing that's most surprised them in the last few months or the last six months? And actually, particularly there, it is not...

anything that Donald Trump has done. It's what's happened in China. It's the breakthroughs, whether it's deep sea or, and the things underpinning that and the things that have followed in the wake of deep sea, it's the breakthroughs in electric cars, the pace at which under the surface, Chinese key industries have developed. And it sort of feels like the subtext to almost everything you, many columns and many pieces being written about China, whether on any subject, the subtext is China's going to win.

So it's interesting. We spend a lot of time. I think the open source movement in China, open source software movement is very powerful.

Now, examining it, though, not though, I think it's great for competition around the world. We are using some of the deep sea breakthroughs they distilled from our models. You know, we complemented them very creative. So so that's good. We can use those models and we're doing some open source models as well in China.

Nobody wants to pay for anything. You know, I got a question from one of the LLM providers over there, the CEOs. He said, how is it that people are willing to pay $20 a month?

And I said, because they want to be able to use it more instead of the limited time for free. So people won't pay here. And I'm thinking to myself, you know, the question for all of us is commoditization. Are they going to commoditize everything? Look at what's going on with EVs. Thank goodness Tesla is not an EV manufacturer. People say that. I just told you what I think it is.

Um, but I, I, you know, I asked, I did a podcast there in Hong Kong just a couple of months ago and I said, okay, you have to use some of these productivity gains. This was a co-CEO of APAC for a large bank. Actually it was HSBC. I can say that here, right? Uh, and you've got to turn around that productivity and we, and so do we.

What do you need to do with those productivity gains? You need to raise compensation because you need to drive your consumer economy. What do we need to do in the United States to compete more effectively against China? We need to use it to

cut prices. That's why we think there's going to be a deflationary pull in the U.S. economy, more than people expect right now. All right. On that bombshell, we have covered a lot of ground. We haven't done justice to any of it, but I appreciate Kathy, Lizzie and John contributing. Thanks for listening to Trumponomics.

from Bloomberg. It was hosted by me, Stephanie Flanders. I was joined by ARK Invest CEO, Cathy Wood, Bloomberg TV UK correspondent, Lizzie Burden, and Bloomberg Editor-in-Chief, John McAfwaite, with special thanks to the team at Founders Forum. Thank you. Thank you, Stephanie. Thank you, Stephanie. They said to get a respected degree, I'd have to go to a big state university.

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