ARK Invest: From Rolling Recession to Bull Market?

Arguably, the economy has been in a rolling recession over the past few years. Slow growth, combined with higher than average inflation, has created a decline in real terms. However, reigning in excess government spending and the productivity growth from AI could create a bull market.

Should that happen, returns will increase, and not just in asset prices. More capital will be used instead of labor. AI and robotics will allow for goods and services to be created more cheaply.

Several factors could help kick off a new bull market. One catalyst could be a change in tax policy. Reducing taxes, if rates are too high, could spur growth in the private sector. Over time, a larger private-sector economy could generate more total revenues, even at a lower rate.

Potential tax reductions from here increase global competitiveness for American firms.

Another catalyst could be higher productivity from the rollout of AI and automation. Many of today’s AI tools are ideal for reducing repeatable and replicable tasks such as data entry. Breakthroughs in robotics can help significantly reduce simple tasks that require considerable human labor.

Robotics and automation can lead to short-term job losses. While that may sound fearful, it is just short-term. Over time, new technologies create more jobs, and usually higher-value ones with higher wages.

Looking at the potential positives over the next few years, there’s a strong case for markets to head higher. And investors who stick with growth stocks could reap significant rewards.

To see the full analysis on growth plays in the years ahead, click here.