Cathie Wood Outflows Grow as Diehard Fans Face Biggest Test

ARK has a terrible 2021. The beginning of 2022 is even worst.

Nasdaq 100 $QQQ now down 5% YTD, $ARKK already down 15% YTD.

Regards
James

Bloomberg Markets

Cathie Wood Outflows Grow as Diehard Fans Face Biggest Test

  • ARK funds are tumbling in 2022 as rising yields hammer tech
  • Flagship ETF sees biggest outflow since March in latest data

The loyalty of Cathie Wood’s legion of fans may be finally waning, as the new year bloodbath in speculative technology stocks hands the star money manager a miserable start to 2022.

Investors pulled $352 million from Wood’s flagship ARK Innovation ETF (ticker ARKK) on Wednesday, according to data compiled by Bloomberg. That was the biggest outflow since March.


The Cloud Computing ETF $CLOU is in a 27% drawdown. This one fell 30% from peak to trough during the COVID Crash.

ARK Innovation $ARKK drawdown would be at 50.2% on a closing basis at current level. Fell 42% during the COVID Crash.

Regards
James

Growth stocks are in free fall due to the threat of rising interest rates. The ARK ETFs have it bad because they can’t control redemptions.

Time will tell. It feels like the 2nd half of 2018 when the Nasdaq dropped 23% and most of the big 8 tech stocks dropped 30% or more. Oil and natural gas are doing well along with some commodities that’s about it lately. It was getting a bit crazy with the nasdaq up 35% Annually for the last 3 years so a pull back is good in my opinion.

Cheers,
MV

Steve,

Agreed. As long as rates go higher we will see pressure on Nasdaq and crypto.

Current yields implying significantly more pain for $QQQ. Imagine what may happen if (when?) the 10-year hits 3%

Regards
James


Don’t forget about insurance companies and banks. They’ve also been doing very nicely lately. But, yeah, all of my biggest gains lately have indeed been from oil and gas companies.

Here’s a look at total returns for S&P sector ETFs over the last 12 months and 10 years. Energy $XLE up 58% last 12 months but just 31.3% last 10 years. The S&P 500 Energy sector ETF $XLE is already up 16% YTD through the first two weeks.

Regards
James


Total Returns %.png

Have you used this tool? https://www.portfolio123.com/app/taxonomy You can get a lot more detail this way, and the taxonomy series are very high quality. You can also drill down to subsectors, industries, and subindustries.

Yuval,

Thanks, it is very useful.

Regards
James

This is an advantage the individual investor has over a fund manager … individual investors don’t have to market themselves to as a “tech visionary” to the public, and get tied to a regime that is going out of style. All she can do is keep doubling down and wait/hope for it to turnaround. If she switches styles, she’ll see even more outflows.

Also, gotta feel bad for all those who have been allocating to gold for years anticipating a pro-inflationary environment based on what worked in 1977, and it turns out they would have just been better off buying B shares of Berkshire Hathaway. “Conventional wisdom” is curve fitted too.

All,

Without using any hindsight (in this thread at least) Cary previously predicted in another thread that Financials would do well in an inflationary environment: Inflationary environment

One thing I am thinking about is that while inflation and interests rates are correlated they can behave differently, can’t they? Assuming this can occur, would financials diverge from say energy?

I am not sure but perhaps energy and commodity companies like both inflation and rising interest rates? My reasoning would be that rising interest rates is not good for growth companies and favors value companies. This assumes that some of the smaller energy companies (not Exxon perhaps) are value companies.

I am not sure that this would favor financials. I don’t know and don’t want to speculate. But in building a diversified portfolio, Ray Dalio definitely considers interest rates and inflation as separate factors (and possibly not correlated in certain environments) for his All-Weather strategy.

As perhaps a clear example of Ray Dalio’s thinking he buys both nominal bonds and TIPS (using margin to increase the returns). But he thinks TIPS and nominal bonds can behave differently in different environments and he expects there to be environments where interests rates and inflation may not have a high correlation (otherwise he would not bother).

It is not unreasonable to wonder if inflation and rising interest rates might get uncorrelated at some point in the future. What companies might do well with high inflation but stable interest rates (or the reverse)?

My apologies if anyone thinks this is off subject for this thread, in which case I will simply say Cary called this on financials.

Best,

Jim

Some financials will do well regardless of rates, like credit card companies. As the price of goods and services increases, they get to take a cut of larger bills and transactions. I suspect Warren Buffett has bought American Express over many many years precisely because of it’s ability to perform in inflationary environments.

Cary, Nice! -Jim

It’s a great tool for up to 1 year. Is there any way to look at longer periods, such as seven to ten years?

I love it. I may have to use this some day Inman :-). I’ve been thinking quite a bit about “conventional wisdom” in the markets for the last few months and just how it divergent it can be from what has actually happened and worked. Your catch phrase is, well, fitting. (Dad joke, sorry).

TuttleCapital excellent timing in launching $SARK.

Regards
James