Unlocking a New Era of Growth: The Potential Impact of US Policy Shifts on Innovation

The outcome of the recent US election could signal a pivotal shift in economic and regulatory landscapes that will provide significant tailwinds for innovation across multiple sectors. Like the transformative policies of the 1980s, the new environment could catalyze productivity and advance technologically-enabled innovation. In this article, we outline ARK’s insights on how changes in digital assets regulation, health care, defense contracting, and mergers and acquisitions (M&A) could unleash a new era of growth and disruptive innovation.

Pro-Innovation Economic Policies: A New Wave of Growth

Similar to the 1980s, the US economy has faced challenges around inflation, interest rates, and productivity. Pro-growth tax policies and deregulation could create opportunities for productivity gains. If new policies incentivize capital inflows and investment, the resulting innovation could echo the “golden age” of active equity investing that occurred during the 1980s and 1990s.

The convergence between and among artificial intelligence (AI), robotics, energy storage, multiomic sequencing, and blockchain technologies is poised to drive unprecedented productivity growth. With a supportive policy backdrop, the deflationary forces associated with technologically-enabled innovation should counter inflation and drive sustained growth, paving the way for a renaissance in innovation-based strategies.

Digital Assets: Unleashing the Next Wave of Financial Innovation

The election results seem to be positioning the digital assets industry for significant momentum. With an openly pro-crypto administration and a new regulatory environment, initial public offerings (IPOs) for digital asset companies are likely to drive the adoption of blockchain-based solutions. Legislation including the Financial Innovation and Technology for the 21st Century Act (FIT 21) and the Clarity for Payment Stablecoins Act could set the foundation for a crypto-friendly Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), potentially removing existing barriers to institutional custody and investment. As a result, digital asset innovation should thrive in the US, creating meaningful opportunities associated with a new global monetary system, in decentralized finance (DeFi), digital property rights, and other financial technology solutions.

Companies like Coinbase, Robinhood, and Block seem poised to benefit from such regulatory advancements. As platforms that offer digital asset trading and related services, they stand to gain from a clear regulatory framework that should enhance investor confidence and drive greater institutional participation in a new asset class. A leading cryptocurrency exchange like Coinbase could solidify its  market dominance, while Robinhood’s expands its digital asset presence as more users enter the space. Block’s focus on bitcoin could integrate digital assets into its ecosystem, creating new financial products and services. Together, these companies seem well-positioned to capitalize on the broader adoption of blockchain technology and digital currencies.

Health Care: Driving Competition and Transformative Innovation

The health care sector could benefit enormously from policies that incentivize competition and streamline regulations. Reforms that increase access to healthcare, enhance price transparency, and modernize the FDA could pave the way for gene editing, precision medicine, and AI diagnostics. If the incoming administration pursues proactive and preventive healthcare, the industry is likely to pivot from “sick care” to more sustainable, patient-centric care. 

Companies like CRISPR Therapeutics, Intellia Therapeutics, and Guardant Health seem well-positioned to benefit. CRISPR and Intellia, both leaders in gene editing, stand to gain from a regulatory environment that supports faster approval timelines for novel therapies, particularly cures. With its cutting-edge diagnostic tools, Guardant Health could benefit from a boost in the adoption of its early-detection diagnostic tools. 

Defense Innovation: A Shift Toward Agile, Cost-Effective Technologies

The defense industry seems poised for a paradigm shift. Traditional defense contractors face challenges in adapting to the increasing demand for low-cost, AI-driven solutions essential in modern warfare. With potential policy shifts that prioritize cost-effectiveness and technological agility, smaller defense contractors are likely to enjoy outsized success. Companies like Shield AI, Anduril, and Kratos could lead this transformation, much like SpaceX has impacted aerospace with fixed-price contracts and rapid innovation. Defense and national security are likely to rely increasingly on autonomous and AI-enabled solutions, benefiting both innovation-driven companies and the public sector.

Mergers & Acquisitions: An Opening for Disruptive Growth

Stringent Federal Trade Commission (FTC) regulations that have depressed M&A activity during the past four years should give way to a spate of strategic acquisitions across the innovation landscape. Increased M&A activity is likely to spur price discovery and create valuation floors for high-potential, disruptive companies, offering them greater access to funding and exit opportunities. A revival in M&A activity could enhance financing flexibility for innovative firms and level the playing field for disruptors to scale their solutions and compete with industry incumbents.

Preparing for an Innovation-Driven Future

The convergence between supportive policy shifts and technological innovation should create meaningful investment opportunities. Lower regulatory barriers and increased market incentives should stimulate disruptive innovation and economic growth. ARK Invest remains committed to identifying and supporting innovation leaders. Through our open-source research and investment strategies, we are committed to positioning our investors on the right side of change to participate in one of the most exciting periods in technology and innovation history.

Important Information

The information provided in this material is for informational purposes only and should not be used as the basis for any investment decision and is subject to change without notice. It does not constitute, either explicitly or implicitly, any provision of services or products by ARK, and investors should determine for themselves whether a particular investment management service is suitable for their investment needs. All statements made regarding companies or securities are strictly beliefs and points of view held by ARK and are not endorsements by ARK of any company or security or recommendations by ARK to buy, sell or hold any security. Historical results are not indications of future results. 

Certain of the statements contained in this material may be statements of future expectations and other forward-looking statements that are based on ARK's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. ARK assumes no obligation to update any forward-looking information. ARK and its clients as well as its related persons may (but do not necessarily) have financial interests in securities or issuers that are discussed. Certain information was obtained from sources that ARK believes to be reliable; however, ARK does not guarantee the accuracy or completeness of any information obtained from any third party.

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