The ETF is trading at $91.01, down $5.98 (-6.17%)
At least two of the fund's holdings are down over 10% on the day as the Nasdaq complex, from the 100 to the whole index is getting hit.
First up, Slope of Hope:
A Leaky ARKK
Last year, it seems no portfolio manager got more television time, more press, and more adulation than Cathie Wood. One can speculate as to the reason. I’ll hold my own tongue on this matter. But we can all agree that God knows it wasn’t because of her amazing performance. In a year when everything skyrocketed to nauseating highs, Cathie’s momentum-obsessed investing style was a dud. And here we are, on this very day, in which lifetime highs were again achieved, and down she goes....
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If Ms. Wood is right on both her thesis and right about the individual stock picks to execute that thesis this thing would be very interesting after a further 50 - 60% down move from here.
From Daily FX, December 31, 5:00 pm:
ARKK in Peril as the Fed Pivots to a Higher Interest Rates Regime: Top Trade Q1 2022
The Federal Reserve made one thing abundantly clear at the end of its December meeting: the U.S. economy is moving toward tighter monetary policy amid upside inflation risks and improving labor market conditions. At this gathering, the FOMC doubled the pace of its taper to $30 billion per month, a move that will allow the asset purchases program to conclude in March, three months earlier than originally planned. At the event, policymakers also signaled that they could raise the federal funds rate three times in 2022 to counter elevated price pressures, a much more aggressive normalization schedule than envisioned in September, when the median dot-plot expectation only pointed to a half hike.
Although stocks initially gained despite the Fed's hawkish pivot, it is unlikely that broad-based bullish sentiment will prevail in the early stages of 2022, a situation that may pave the way for pockets of weakness in the equity market. This may be a good moment to entertain some trading strategies that capitalize on a potential pullback in risk assets.
First, I want to start by saying that I am not calling for a widespread sell-off. While the transition to a higher rates regime is clearly a headwind, stocks are not created equal. Based on this premise, it can be argued that some companies will feel the pinch of less accommodation more than others.
In my opinion, technology, but more importantly, growth stocks with exorbitant multiples and unprofitable businesses will stand to lose the most from the shift to an environment with less stimulus. Conversely, value-oriented companies with strong balance sheets and expanding margins may be the least affected.
With the speculative corner of the market in peril, I believe that the ARK Innovation ETF (ARKK) is in a very precarious place and, as a result, prone to a big drop in the coming months. ARKK is composed of long-dated innovative growth companies with little or no revenues, that happen to be very sensitive to rising rates expectations because their value rests predominantly on future earnings. As the Fed lift-off approaches and investors reassess valuations, ARKK’s holdings could take a hit, sending the ETF’s price tumbling....
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The 10-year treasury yield, proxied here by the CBOE 10 Year Treasury Note Yield Index (TNX) is back up to 1.674% after the big move yesterday and higher yields again today. Six months of action:
