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Why Cathie Wood’s former Arhi Innovation ETF lost all its profits in 2021

What is rising in the stock market is inevitably falling and this includes one of the hottest ETFs in 2020.

Cathy Wood, a money manager who achieved remarkable fame in 2020 with bold Tesla (TSLA) bets and other hot tech names, saw her flagship Ark Innovation ETF lose all its 2021 earnings on Thursday. The ETF fell 5.5% in heavy afternoon trading on Thursday, leading to a year-on-year decline to a similar level.

In 2020, the ETF jumped to 150%.

The withdrawal of the much larger ETF reflects the greater retreat of technology stocks in recent weeks.

Yields on the 10-year treasure fell from about 1

.07% on February 1 to 1.53% now. Investors speculate that with a strong economic recovery later this year, as more people receive the COVID-19 vaccine, inflation will return. In turn, this will push the Fed to raise interest rates faster than expected and then lower stock prices.

Sales pressure is sharpest for the Nasdaq Composite, which is 20% lower than last month, as investors model a lower return on hot technology stocks amid rising interest rates. The top five holdings in Wood’s Ark’s ETF – Tesla, Square, Roku, Teladoc and Spotify – lost an average of 17% in one month.

Tesla’s largest ETF holding (10.07% of the ETF) is the leader of the decline and is up 29%.

Of course, the downward bias for ETFs may continue in the short term until investors feel comfortable owning technology growth companies, rising returns (or returns elevated at current levels).

“I’m worried after the monstrous rally we’ve had, especially in the name of branded technology, that this value spin is likely to continue,” said veteran technology investor Paul Meeks of Independent Wealth Solutions Management at Yahoo Finance Live.

“We have found a ceiling of about 1.4% to 1.5% in the 10 years, and if we break this resistance, it could be even more painful in these technology stocks, because as expensive growth stocks, they are long-lasting. assets, “added Meeks.” They are super sensitive downwards to price increases. “

Brian Soci is the editor – in – chief and anchor in Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and onwards LinkedIn.

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