ARK Founder "Wood Sister" predicts 2026: Gold peaks, US dollar rebounds, Bitcoin moves into an independent trend

Title: Cathie Wood’s 2026 Outlook: The US Economy Is A Coiled Spring

Author: Cathie Wood, Founder of ARK Invest

Author: Rhythm BlockBeats

Source:

Reprint: Mars Finance

ARK Invest founder Cathie Wood (“Woodie”) released a macro outlook in her latest 2026 New Year letter to investors, comparing the next three years to “Reaganomics on steroids.” She pointed out that with deregulation, tax cuts, prudent monetary policy, and the integration of innovative technologies, the US stock market will usher in another “golden age,” while the upcoming dollar surge may put an end to the rally in gold prices.

Specifically, Cathie Wood believes that although real GDP has continued to grow over the past three years, the underlying US economy has actually experienced a rolling recession and is currently in a “coiled spring” state, with the potential for a strong rebound in the coming years. She emphasized that with David Sacks appointed as the first AI and cryptocurrency czar leading deregulation efforts, and corporate effective tax rates approaching 10%, US economic growth will benefit greatly from policy redress.

On the macro level, Wood predicts that driven by a productivity boom, inflation will be further controlled or even turn negative. She expects that in the next few years, the US nominal GDP growth rate will stay between 6% and 8%, mainly fueled by productivity improvements rather than inflation.

In terms of market impact, Wood forecasts that the relative advantage of US investment returns will push the dollar exchange rate significantly higher, replicating the nearly doubling of the dollar in the 1980s. She warns that although gold prices have surged substantially in recent years, a strengthening dollar will suppress gold prices, while Bitcoin, due to its supply mechanism and low asset correlation, will exhibit a different trend from gold.

Regarding market valuation concerns among investors, Wood does not believe that an AI bubble has formed. She notes that although current P/E ratios are at historic highs, the explosion in productivity driven by AI, robotics, and other technologies will absorb high valuations, and the market may deliver positive returns amid P/E compression, similar to the bull market in the late 1990s.

Below is the original text of her investor letter:

Happy New Year to ARK investors and supporters! We sincerely appreciate your support.

As I outline in this letter, we truly believe there are many reasons for investors to remain optimistic! I hope you enjoy our discussion. From an economic history perspective, we are at a pivotal moment.

The Coiled Spring

Despite continuous growth in real US GDP over the past three years, the underlying structure of the US economy has undergone a rolling recession, gradually transforming into a compressed spring that could rebound strongly in the coming years. To address supply shocks related to the COVID-19 pandemic, the Federal Reserve raised the federal funds rate from 0.25% in March 2022 to 5.5% over the next 16 months, a record increase of 22 times. This rate hike pushed housing, manufacturing, non-AI capital expenditures, and lower- and middle-income groups into recession, as shown below.

Measured by existing home sales, the housing market declined by 40% from an annualized 5.9 million units in January 2021 to 3.5 million units in October 2023. The last time this level was seen was in November 2010, and in the past two years, existing home sales have fluctuated around this level. This indicates how tightly the spring is compressed: current existing home sales are comparable to early 1980s levels, when US population was about 35% lower than today.

Using the US Purchasing Managers’ Index (PMI), manufacturing has been in contraction for about three consecutive years. The diffusion index, with 50 as the dividing line between expansion and contraction, is shown below.

Meanwhile, capital expenditures on non-defense capital goods (excluding aircraft) peaked in mid-2022, and since then, regardless of technological influence, this expenditure level has returned to that peak. In fact, since the tech and telecom bubble burst, this capital expenditure indicator struggled for over 20 years before breaking through in 2021, when COVID-related supply shocks accelerated digital and physical investments. The previous spending ceiling appears to have become a floor, as AI, robotics, energy storage, blockchain, and multi-omics sequencing platforms are ready to usher in a golden era. After the tech and telecom bubble of the 1990s, a peak of about $70 billion in spending lasted for 20 years. Now, as shown below, this could be the strongest capital expenditure cycle in history. We believe the AI bubble is still a long way off!

Meanwhile, data from the University of Michigan shows that confidence among lower- and middle-income groups has fallen to its lowest point since the early 1980s. Back then, double-digit inflation and high interest rates severely eroded purchasing power and pushed the US economy into a series of recessions. Additionally, as shown below, confidence among high-income groups has also declined in recent months. In our view, consumer confidence is one of the most compressed “springs” with the greatest rebound potential.

Deregulation, Tax Cuts, and Lower Inflation and Interest Rates

Thanks to the combined effects of deregulation, tax cuts (including tariffs), inflation, and interest rate reductions, the rolling recession experienced by the US in recent years could quickly and sharply reverse in the coming year and beyond.

Deregulation is unleashing innovation across various sectors, led by David Sacks as the first “AI and crypto czar.” Meanwhile, reductions in tips, overtime pay, and Social Security taxes will bring substantial tax refunds to US consumers this quarter, potentially boosting the annualized growth rate of real disposable income from about 2% in late 2025 to approximately 8.3% this quarter. Additionally, with manufacturing facilities, equipment, software, and domestic R&D expenses enjoying accelerated depreciation, effective corporate tax rates could be pushed close to 10% (as shown below), with corporate tax refunds expected to rise significantly. Ten percent is among the lowest global corporate tax rates.

For example, any company starting construction of a manufacturing plant in the US before the end of 2028 can fully depreciate the investment in its first year, rather than depreciating over 30 to 40 years as before. Equipment, software, and domestic R&D expenses can also be fully depreciated in the first year. This cash flow benefit was permanently established in last year’s budget bill and retroactively applies from January 1, 2025.

Over the past few years, inflation measured by the Consumer Price Index (CPI) has stubbornly hovered between 2% and 3%, but in the coming years, for several reasons shown below, inflation is likely to decline to unexpectedly low levels — possibly even negative. First, West Texas Intermediate (WTI) crude oil prices have fallen about 53% from the pandemic high of around $124 per barrel on March 8, 2022, currently down about 22% year-over-year.

Since peaking in October 2022, new single-family home sale prices have declined about 15%; meanwhile, the inflation rate of existing single-family home prices — based on a three-month moving average — has fallen from a peak of about 24% year-over-year in June 2021 (post-pandemic) to about 1.3%, as shown below.

In Q4, to digest nearly 500,000 new single-family homes in inventory (shown below, the highest level since just before the 2007 global financial crisis), the three major homebuilders sharply cut prices, with year-over-year declines of: Lennar -10%, KB Homes -7%, and DR Horton -3%. The impact of these price declines will lag in the Consumer Price Index (CPI) over the next few years.

Finally, one of the strongest forces to suppress inflation—nonfarm productivity—has grown countercyclically amid the ongoing recession, with a 1.9% year-over-year increase in Q3. In stark contrast to the 3.2% growth in hourly compensation, productivity gains have reduced unit labor cost inflation to 1.2%, as shown below. This figure does not show the cost-push inflation seen in the 1970s!

This improvement is also validated: according to Truflation’s inflation measure, recent year-over-year inflation has fallen to 1.7%, as shown below, nearly 100 basis points below the inflation rate calculated by the US Bureau of Labor Statistics (BLS) based on CPI.

Productivity Boom

In fact, if our research on technology-driven disruptive innovation is correct, then over the next few years, due to cyclical and long-term factors, nonfarm productivity growth should accelerate to 4-6% annually, further reducing unit labor cost inflation. The key innovation platforms currently developing—AI, robotics, energy storage, public blockchain technology, and multi-omics—are expected to not only push productivity to sustainable new highs but also create enormous wealth.

Improved productivity could also correct significant geopolitical imbalances in the global economy. Companies can channel the benefits of productivity gains into one or more of four strategic directions: expanding profit margins, increasing R&D and other investments, raising wages, and/or lowering prices. In China, raising wages for higher-productivity workers and/or increasing profit margins could help the economy escape structural overinvestment issues. Since joining the WTO in 2001, China’s investment as a percentage of GDP has averaged about 40%, nearly twice that of the US, as shown below. Raising wages will help shift China’s economy toward a consumption-driven model, escaping the path of commodification.

However, in the short term, technological productivity improvements may continue to slow employment growth in the US, raising unemployment from 4.4% to above 5.0%, and prompting the Federal Reserve to continue cutting rates. Subsequently, deregulation and other fiscal stimulus measures should amplify the effects of low interest rates and accelerate GDP growth in the second half of 2026. Meanwhile, inflation may continue to slow, driven not only by declines in oil prices, housing prices, and tariffs but also by technological advances that boost productivity and reduce unit labor costs.

Surprisingly, the cost of training AI decreases by 75% annually, while inference costs (the cost of running AI models) drop as much as 99% per year (based on some benchmarks). The unprecedented decline in various technology costs should drive a surge in their unit growth. Therefore, we expect nominal US GDP growth to stay between 6% and 8% over the next few years, mainly driven by 5-7% productivity growth, 1% labor force growth, and -2% to +1% inflation.

The deflationary effects brought by AI and the other four major innovation platforms will accumulate and create an economic environment similar to the last major technological revolution triggered by internal combustion engines, electricity, and the telephone during the 50 years up to 1929. During that period, short-term interest rates moved in sync with nominal GDP growth, while long-term rates responded to the deflationary undercurrents accompanying technological prosperity, resulting in an average yield curve inversion of about 100 basis points, as shown below.

Other New Year Reflections

Gold Price Rise and Bitcoin Price Decline

During 2025, gold prices increased by 65%, while Bitcoin prices fell by 6%. Many observers attribute the surge in gold from $1,600 per ounce in October 2022 to $4,300, a 166% increase, to inflation risks. However, another explanation is that global wealth growth (evidenced by a 93% increase in the MSCI Global Stock Index) outpaced the approximately 1.8% annualized growth in global gold supply. In other words, incremental demand for gold may have exceeded its supply growth. Interestingly, during the same period, Bitcoin prices surged by 360%, while its supply growth rate was only about 1.3% annually. Notably, gold and Bitcoin miners may react differently to these price signals: gold miners can increase gold output, but Bitcoin cannot. Based on calculations, Bitcoin is expected to grow about 0.82% annually over the next two years, then slow to about 0.41% per year.

Long-term View of Gold Prices

Measured by the ratio of market value to M2 money supply, gold prices have only exceeded this level once in the past 125 years, during the early 1930s Great Depression. At that time, gold was fixed at $20.67 per ounce, while M2 money supply plummeted about 30% (as shown below). Recently, the gold-to-M2 ratio has surpassed its previous peak, which occurred in 1980 when inflation and interest rates soared into double digits. In other words, from a historical perspective, gold prices are at very high levels.

The chart below also shows that this ratio’s long-term decline correlates closely with robust stock market returns. According to research by Ibbotson and Sinquefield, since 1926, stocks have had a compound annual return of about 10%. After the ratio reached two major long-term peaks in 1934 and 1980, the Dow Jones Industrial Average (DJIA) achieved returns of 670% and 1015% over 35 and 21 years respectively, corresponding to annualized returns of 6% and 12%. Notably, small-cap stocks had annualized returns of 12% and 13% respectively.

For asset allocators, another important consideration is Bitcoin’s returns relative to gold and its low correlation with other major asset classes since 2020, as shown below. Interestingly, Bitcoin’s correlation with gold is even lower than the correlation between the S&P 500 and bonds. In other words, for asset allocators seeking higher risk-adjusted returns over the next few years, Bitcoin could be a good diversification choice.

Dollar Outlook

In recent years, a popular narrative has been the end of American exceptionalism, with the dollar experiencing its largest first-half decline since 1973 and its biggest full-year drop since 2017. Last year, measured by the trade-weighted dollar index (DXY), the dollar fell 11% in the first half and 9% for the full year. If our forecasts for fiscal policy, monetary policy, deregulation, and US-led technological breakthroughs are correct, US investment returns will outperform those of other regions, boosting the dollar exchange rate. The policies of the Trump administration resemble those of Reaganomics in the early 1980s, when the dollar nearly doubled in value, as shown below.