Cathie Wood’s ARK ETFs Are in a Deep Hole—Already

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Updated Jan. 5, 2022 7:05 p.m. ET / Original Jan. 5, 2022 6:07 p.m. ET

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Cathie Wood of ARK Invest

Reed Young

The caller twelvemonth didn’t bring a caller commencement for Cathie Wood’s ARK Invest, a money institution known for its absorption connected innovation stocks and precocious terms targets.

The firm’s flagship ARK Innovation exchange-traded money (ticker: ARKK) plunged 7.1% successful Wednesday trading, marking its worst time since Sept 3, 2020. All of ARK’s different ETFs, including the latest, ARK Transparency (CTRU)—launched successful December—are besides heavy successful antagonistic territory.  

Growth stocks fell connected Wednesday aft the latest minutes from the Federal Reserve’s December argumentation gathering were released, suggesting that the cardinal bank’s rate increases mightiness beryllium earlier and faster than marketplace has expected. 

Investors were spooked arsenic Fed Chairman Jerome Powell shifted his code to stress the risks of inflation—after months of describing rising prices arsenic “transitory”—as a caller Covid-19 variant is rampaging crossed the state and causing supply-chain disruptions.

The S&P 500 lost 2% successful the past 2 hours of Wednesday’s trading, maturation stocks wrong the scale tumbled 3%, and the tech-heavy Nasdaq Composite dropped 3.3%. 

But the ARK ETFs were immoderate of the worst-performing funds amid Wednesday’s decline. Besides ARK Innovation, ARK Genomic Revolution (ARKG) was down 7.1%, ARK Fintech Innovation (ARKF) dropped 6.6%, and ARK Next Generation Internet (ARKW) fell 6.2%. Other groups of maturation stocks, specified arsenic blockchain, cannabis, cleanable energy, and technology, were besides heavy successful the red. 

Wednesday’s nonaccomplishment was conscionable the latest agelong of ARK funds’ year-long struggle. ARK ETFs were immoderate of the best-performing funds successful 2020, soaring an mean of 150% arsenic the pandemic accelerated the adoption of galore emerging platforms and technologies that companies successful its portfolios own.

Since peaking successful February 2021, however, the funds person been tumbling downhill, shedding overmuch of their gains from the twelvemonth before. Rising ostentation has made the aboriginal currency travel of growth-oriented innovation firms little invaluable today, and investors were seeking returns from safer corners, specified arsenic cheaply traded cyclical stocks.

With the Fed’s hawkish pivot, it looks similar the volatility successful maturation stocks and ARK funds volition continue. But if ostentation tin beryllium somewhat contained pursuing the Fed’s tightening argumentation successful 2022, innovation stocks mightiness clasp immoderate rebound—though that won’t beryllium anytime soon.       

Write to Evie Liu astatine evie.liu@barrons.com

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