Cathie Wood advises investors more stock market and bitcoin and less bonds

Cathie Wood, founder of ARK Investment, is advising investors to focus more on the stock market and bitcoin, and less on bonds. In an extensive letter to investors, Wood argues that the traditional 60/40 portfolio split is no longer effective and suggests investing more in the stock market and bitcoin, while reducing exposure to bonds.

Wood believes that the next decade could combine more growth and productivity (due to AI), lower inflation, and higher interest rates. If this scenario plays out, Wood contends that the traditional 60/40 portfolio would lose relative attractiveness compared to stocks. She designates bitcoin as a hedge and diversification tool. Wood predicts that productivity could accelerate to as high as 7%, driven by technological advancements such as AI, robotics, energy storage, and blockchain.

This growth could increase real GDP growth to around 7% over the next five years. Wood's reasoning is based on a significant increase in productivity. She estimates that productivity could grow at sustainable rates of 5-6% compared to the 3-3.5% observed in previous technological cycles. This improvement would allow companies to increase margins, invest more, raise wages, or lower prices.

Wood argues that technological advancements are causing a dramatic reduction in costs. For instance, the cost of inference in AI models like ChatGPT, Claude, Gemini, or Grok is falling by more than 99% annually. Wood believes this technological deflation can simultaneously boost demand, margins, and growth. She contends that the issue won't be high interest rates but rather which companies are prepared for them.

Wood predicts that short-term interest rates could rise alongside nominal GDP growth, but this wouldn't necessarily be negative for stocks. Companies that benefit from increased productivity and higher profits could better absorb higher interest rates, while highly leveraged companies with variable-rate debt would be more exposed.

Wood draws a parallel with the Industrial Revolution, when the interest rate curve often inverted while the economy maintained strong growth. She posits that we could see high short-term interest rates, relatively low long-term rates due to deflation, and an inverted curve, but without the recession typically associated with it.

Therefore, bonds would lose relative attractiveness. If strong growth, high productivity, low inflation, and high short-term interest rates occur, Wood believes the environment would be more favorable for corporate profits and, consequently, stocks than for fixed income. As the head of ARK Investment, Wood suggests revising the traditional 60/40 portfolio, moving from 60% stocks/40% bonds to a more stock-heavy allocation.

She mentions bitcoin as a potential safety net against bankruptcy and counter-party risks stemming from high debt. Wood notes that high interest rates could strain public debt and credit and private credit funds. She warns that technological disruption could displace many companies from the old world and cause widespread bankruptcies.

In this scenario, ARK sees serious counter-party risks in the financial system, adding that this could be another reason to consider potential insurance policies like gold and bitcoin. Lastly, Wood defends bitcoin as a means of diversification. In her January 2026 analysis, bitcoin's correlation with the S&P 500 was 0.06 and with US bonds 0.15 using weekly returns from 2020-2026.