Cathie Wood sees a Great Depression-like search for safety in the stock market

Something funny happened in the market on Thursday: The most eagerly awaited report of the entire earnings season, Nvidia’s, more than delivered, and while the chipmaker’s investors benefited, the rest of the market slumped. The blame fell on rising interest rates after better-than-expected economic data.

Cathie Wood, the chief executive and chief investment officer of ARK Invest, gave a broader perspective: “In our view, the search for cash and safety in the equity markets today is as intense as that during the Great Depression in the early 1930s,” she said on the social media service X on Thursday night. “When fear dissipated, the market broadened out and rewarded risk-taking once again.”

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Before going further, the elephant in the room when mentioning Wood and Nvidia NVDA in the same story is that she infamously exited the stock at precisely the wrong time, selling most of her stake prior to Nvidia’s meteoric ascent on the back of artificial intelligence demand.

Her flagship fund, the ARK Innovation ETF ARKK, has dropped 17% this year, weighed down not by just Tesla TSLA— more on the automaker later — but also by other top holdings that have struggled including Roku ROKU, Block SQ and UiPath PATH, in a year Nvidia has soared 110%.

Wood’s argument is that market concentration is the evidence of the search for cash and safety.

One piece of evidence of this concentration is that the weight of Nasdaq 100 companies in the S&P 500 is now at 45%.

“The Nasdaq used to be a very fertile place for companies in the mid-to-large range,” she said in a recent presentation. “They were the innovators, they were the disruptors. We feel the Nasdaq 100 does very little of that right now.”

She also points to an analysis done by Goldman Sachs earlier in the year, showing that the market cap of the largest stock relative to the 75th percentile ranked one is the highest since 1932.

Her main point, along with a pessimistic reading of the U.S. economy, is that once interest rates start coming down, market gains will broaden out.

“Last year the market did seem to start moving … in that direction, so that was the beginning we think of this move, but if we’re right this [Goldman market concentration] chart would suggest the move has miles to go,” she said.

The market

After the 606-point stumble for the Dow DJIA on Thursday, its worst in more than a year, stock futures ES00 NQ00 pointed mildly higher. There was some sell-the-news action in Ethereum ETHUSD, after the Securities and Exchange Commission approved spot ETFs holding the cryptocurrency.

The buzz

Durable-goods orders rose 0.7% in April, as the final reading of the University of Michigan consumer sentiment is due for release.

Fed Gov. Christopher Waller is speaking at a conference, after saying on Wednesday he would need to see several more months of good inflation data before supporting rate cuts. Goldman Sachs meanwhile pushed back its expectations of the first Fed cut to September, from July.

Tesla TSLA has been cutting production of its Model Y car in China aggressively. Elon Musk denied a report that SpaceX was about to do a tender offer of existing shares valuing the rocket launcher at $200 billion.

Discount department store operator Ross Stores ROST reported stronger-than-forecast earnings.

Business software provider Workday WDAY cut its sales guidance.

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