What’s going up in the stock market is inevitably going down, and that includes one of the hottest ETFs in 2020.
Cathie Wood – a money manager who gained notoriety in 2020 with bold bets on Tesla (TSLA) and other technology names – saw her flagship Ark Innovation ETF lose all of its 2021 profits on Thursday. The ETF rose 5.5% on Thursday in heavy afternoon trading, bringing its year-on-year decline to a similar amount.
In 2020, the ETF shot up nearly 150%.
The downturn for the much-maligned ETF reflects the broader pullback in technology stocks over the past few weeks.
The yield on the ten-year treasury rose from about 1.07% on February 1 to currently 1.53%. Investors have argued that inflation will return with a strong economic recovery later this year as more people get the COVID-19 vaccine. In turn, this will encourage the Fed to raise interest rates faster than expected and then lower share prices.
The selling pressure was strongest on the Nasdaq Composite, which fell 20% in the past month as investors returned lower returns for hot tech stocks amid the rise in rates. The top five stocks in Wood’s Ark ETFs – Tesla, Square, Roku, Teladoc and Spotify – shook an average of 17% in one month.
The ETF’s largest stake (10.07% of the ETF) Tesla led the declines and is down 29%.
To be sure, the downward forecast for the ETF may continue in the short term until investors comfortably own growing technology firms along with rising returns (or rising returns at the current level).
“I am concerned after the sample march we have had especially in the market techniques, that this conversion into value is likely to continue,” said veteran technical investor Paul Meeks of Independent Wealth Solutions Management on Yahoo Finance Live.
“We found a ceiling of about 1.4% to 1.5% over the ten years, and if we break through the resistance, it could have a little more pain in these technology stocks, because they are long-term assets as they grow. -loves are, “Meeks added. “It is extremely sensitive to tariff increases.”
Brian Sozzi is a general editor and anchor by Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and so on LinkedIn.
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