Cathie Wood’s famous fund ARK Innovation is taking a beating…
Year-to-date, the popular innovation-focused exchange-traded fund (ETF) has tumbled roughly 13%.
And at its lowest point on January 7, the ETF had plummeted by nearly 50% from its February 2021 highs.
This marked a significantly larger decline than the one the fund experienced back in March 2020.
ARK’s fall came shortly after a broader sell-off in the market. This was fueled by investors jumping ship from riskier assets over to hedges due to inflation and rising interest rates.
In turn, a variety of ETFs and technology stocks tumbled in tandem, including ARK.
So, while the fund was considered one of the ‘darlings’ of 2020, last year’s performance and current trends have experts now anticipating it will continue to face pressure in the months ahead.
That’s because the U.S. Federal Reserve will likely take more aggressive steps to rein in inflation. This means the central bank will continue to push people away from high-risk assets, weighing on growth stocks and technology companies in the process.
Yet, it may not all be bad news. When one aspect of the market begins to struggle, it often means another is beginning to benefit.
And, right now, experts are suggesting that value and cyclical stocks are poised to report a standout year. Given the lockdowns and supply-chain woes were largely responsible for pushing inflation higher, many investors are embracing some of the benefits of elevated prices.
This means stocks that provide strong dividends are on the rise. It indicates that energy and other commodities should trend higher as well.
And once this happens, stocks like Berkshire Hathaway (BRK.B) should continue benefiting. In fact, Buffett’s company hit a fresh all-time high last week.
Meanwhile, stocks that are held by ETFs such as Vanguard’s Total Stock Market (VTI), iShares’ Core MSCI Emerging Markets (IEMG), and iShares MSCI USA Value Factor (VLUE) could all provide solid exposure to more defensive picks – while also helping investors maintain a diverse portfolio.
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