Catherine Wood, founder of ARK Invest, published her views on the economic situation in 2025 on March 9, pointing out that the U.S. economy may be in the final stage of a rolling recession, and predicted that technological innovation will drive productivity growth and bring about new economic prosperity. However, the market is still in a state of uncertainty, including the monetary and fiscal policy direction of the Federal Reserve (FED), as well as the rapid development of AI technology, which may have a profound impact on the market.
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ToggleUS GDP fell by 3%, and the rolling recession entered the final stage
Wood cited the latest GDP Now indicator from the Atlanta Fed, which showed that GDP could fall by 3% on an annualized basis in the first quarter of 2025. The data shocked the market as many believed that the US economy would be quite stable. However, Wood believes that the US economy has entered a rolling recession since the Federal Reserve launched the interest rate hike cycle in 2022, and this process is now about to end.
She pointed out that although the market may remain turbulent in the short term, companies are already adapting to the new economic environment. As productivity improves, GDP growth rates may accelerate in the future, while inflationary pressures will continue to decline.
The $4.5 trillion tax cut plan is launched, and the market expects policy boost
In terms of fiscal policy, Wood believes that the most noteworthy thing is the US government's $4.5 trillion tax cut plan. She analyzed that the House of Representatives has passed this plan and it is likely to be retroactively applied to January 20, 2025, the date Trump officially takes office, to avoid the risk of economic slowdown due to "delaying investment while waiting for tax cuts."
In addition, the Trump administration also plans to eliminate income taxes on tips, overtime pay and Social Security. These measures will particularly benefit middle- and low-income groups and prevent the government from being criticized for "only taking care of the rich." However, the market is still concerned about whether tax cuts will further widen the fiscal deficit. Wood believes that tax cuts can be promoted without affecting fiscal balance by improving productivity and stimulating economic growth.
Import surge weighs on GDP, consumer confidence remains subdued
According to Wood's analysis, U.S. imports surge by 11%-12% in January 2025, which will have a negative impact on GDP in the short term. However, as imported goods are gradually converted into consumption or inventory, a corresponding economic recovery may be seen in the coming months.
But on the other hand, consumer confidence remains fragile. The recent University of Michigan Consumer Confidence Index shows that the confidence of high-income groups has also begun to waver, which is related to increased market uncertainties, such as changes in tax rates, government policy adjustments, and the possibility that AI technology may replace some jobs. Retailers such as Walmart, Target and Costco have all warned of weakening consumer demand, further deepening market concerns.
The US dollar, tariffs and inflation: the government revenue model is being reshaped
Wood also analyzes the role of tariffs in U.S. finances. She noted that the Trump administration's desire to raise tariffs to make up for the fiscal gap caused by tax cuts is similar to early U.S. history, when the government relied primarily on tariff revenue rather than income tax. However, this may also lead to the devaluation of currencies of other countries to offset the impact of tariffs. For example, China responded to US tariff policies by devaluing its yuan during Trump's first term.
On the other hand, the market is still watching the trend of inflation. Although the FED hopes to bring inflation back below 2%, it is still affected by companies' expectations of price increases, resulting in an early increase in prices of some commodities. However, Wood expects a slowdown in money supply growth, currently running at an annual rate of 3.9%, to eventually push down inflation and return the economy to steady growth.
AI technology and future economy, productivity revolution is coming
Wood particularly emphasized that AI technology will become a key force in promoting productivity growth and may usher in a new golden age for the US economy. She cited historical data and pointed out that whenever major technological innovations such as electricity, automobiles, and telephones appeared, the economic growth rate would increase significantly, and the current development speed of AI and related technologies may even exceed the past.
She believes that the future annual growth rate of US GDP may reach 7.3%, much higher than the average of 3% in the past 15 years. Such growth will not only offset the fiscal impact of tax cuts, but may also drive the stock market into a new round of bull market.
ChatGPT still dominates, DeepSeek and Grok rise
Wood also shared the current AI market trends. She believes that ChatGPT is still the most widely used AI model in the world, but DeepSeek and Grok are also rapidly emerging as major competitors in the market.
In particular, DeepSeek's technological innovation has attracted attention in Silicon Valley, with NVIDIA CEO Jensen Huang, OpenAI CEO Sam Altman, and Elon Musk all praising its technical performance. In addition, Grok's active user growth rate even exceeds that of DeepSeek, indicating that the market's acceptance of new AI models is increasing.
The market is about to recover, and AI and tax cuts are the key
In summary, Wood believes that although the U.S. economy will still fluctuate in the short term, it may usher in strong economic growth in the next few years as the rolling recession ends, AI technology drives productivity improvement, and tax reform stimulates the market. In addition, with the popularization of AI technology, the market structure will change further, and real technology innovation stocks will usher in a new round of explosion.
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