What’s Buzzy: Cathie Wood Likes T-Bonds Over Large Caps

The doyenne of disruption thinks deflation will change the game board. Except for her beloved Tesla.

Which would Cathie Wood rather invest in over the next 10 years: large-cap companies as a whole, or US Treasurys? Her answer: the guvvies.

Right now, the benchmark US 10-year Treasury yields only 1.4%, and its total return—interest plus price changes—is negative 2.3%. At the same time, large caps have done well. The S&P 500, the signal large-cap index, is up 18.6% this year, after a bounce back this week.

Someone at the Morningstar Investment Conference asked Wood, the champion of disruptive technology companies, which she’d prefer.

“I do really think the Treasury bond will do well,” said Wood, also the founder of Ark Innovation. The reason is that, unlike most on Wall Street, she said she thinks deflation—not inflation—lies ahead for the US economy, and tanking consumer prices would buoy bonds. The Bloomberg US Aggregated Bond Index, which covers investment-grade paper such as Treasury corporate bonds, has hardly been a winner this year, losing 0.43%.

What’s more, not all of the growth stocks that have performed so swimmingly of late will continue to do so, she added. Too many carry too much debt, for one thing, in her view. But she remains committed to her faves, as they are bent on disrupting the economic status quo: electric vehicle maker Tesla, digital payment outfit Square, and video health-care prover Teladoc.