Wood Sees Stronger Dollar Ahead, Threatening Gold and Bitcoin

Cathie Wood, CEO of ARK Invest, believes the US dollar is stronger than investors think and could appreciate significantly over the next few years. Wood argues that investors are watching the wrong dollar chart, specifically the US Dollar Index (DXY) that tracks the dollar against six major currencies. This measure, she claims, is outdated and does not accurately reflect the dollar's strength.

According to Wood, the Federal Reserve's broader index, which covers 26 countries and updates its weights annually, shows the dollar has gained 36% since August 2008 and now trades 44% above its long-term average.

Wood's investment case is based on tax incentives that are encouraging companies to reinvest in US factories and data centers, as well as her expectation that Fed Chair Kevin Warsh will maintain tight monetary discipline. She compares the current setup to the early 1980s, when stronger US returns helped send the dollar sharply higher.

The dollar's strength could have significant implications for other assets, including gold and Bitcoin. Gold, which has lost 92% of its purchasing power against the dollar since 2002, may see a reversal in its decline if tighter policy is maintained. Bitcoin, on the other hand, has historically struggled when the dollar strengthens, but it gained 6.14% in September while the DXY rose.