Why Cathie Wood's ARK Innovation ETF Made a Comeback This Week
Shares in Cathie Wood's ARK Innovation ETF (NYSEMKT: ARKK) rose 13.5% in the week to late Thursday afternoon. The move comes as the market rotates into the type of stocks held in the exchange-traded fund (ETF). For reference, the ARK Innovation ETF invests in "disruptive technologies" such as artificial intelligence, automation, robotics, energy storage, and DNA technologies. In other words, precisely the kind of stocks crushed in the market sell-off in 2022.
So why the sudden buying in these kinds of thematic stocks? It comes down to the market deciding to buy such stocks after the Federal Reserve aggressively spiked interest rates last week. It's a classic case of "sell on the rumor and buy on the news." In other words, investors held off buying bombed-out technology stocks until after the Federal Reserve finally made an aggressive move.
While higher interest rates will slow growth – not usually good news for technology stocks – there's a feeling that the value in the market is now in this sector rather than in some of the so-called "inflation plays" that have tended to outperform in 2022. After all, the ARK Innovation ETF is still down more than 53% on the year. So investors are entitled to ask what really happened in the economy such that stocks lose half of their value as a consequence?
Source Fool.com
