ARKK’s Best-Ever Week Still Leaves Plenty of Lost Ground in 2022

(Bloomberg) — A staggering week of gains in Cathie Wood’s flagship exchange-traded fund has done little to repair balances for investors who piled in after 2020.

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The ARK Innovation ETF (ticker ARKK) soared 18% through Friday, its best week on record. The advance was triple the rally in the S&P 500 and more than double the advance of the Nasdaq 100, which both posted their best weekly gains since November 2020. The fund has seen at least five straight weeks of inflows.

Still, shares of the ETF remain down more than 30% year-to-date and have lost over half of their value since reaching an all-time high in February 2021. While short-term dip-buyers have likely profited in recent days as the fund rallied, the big-picture price action suggests many investors are still underwater.

ARKK is unlikely to sustain its rally for too much longer, said Matt Maley, chief market strategist at Miller Tabak + Co.

“All of the headwinds that their top holdings were facing back in January are all bigger problems,” he said. “Inflation and interest rates are high, GDP estimates are lower, the Fed has started to raise rates and the supply-chain issues have deteriorated in recent months. That does not bode well for ARKK over the intermediate term.”

The ETF was down 3.7% on Monday, as of 2:17 p.m. in New York, veering toward its first negative day since dropping 5.9% by last Monday’s close. U.S. equities also drifted as investors digested higher commodities prices and the war in Ukraine.

But for others, the fund and the high-growth technology stocks it invests in may be reaching oversold levels.

Some of those types of assets “did not deserve to be sold off in that way, so that seems that there was just an overselling, an overreaction,” said Aoifinn Devitt, chief investment officer at Moneta, by phone from Chicago. “And then, as some of the geopolitical risks moderated in terms of the potential for surprise, that then led to some of the negative sentiment ebbing,” Devitt added.