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March 04, 2021 at 06:03 PM
What You Need to Know
- The drop reflects a selloff in the tech sector as bond yields rise and inflation worries grow.
- The fund is still up more than 240% since its March 2020 low.
- For the most part, investors have held steady during ARKK’s selloff.
A 24% drop from its all-time high has put Cathie Wood’s flagship exchange-traded fund in the red for 2021.
The Ark Innovation ETF (ARKK) fell 5.3% on Thursday, wiping out the $22.9 billion fund’s price advance for the year. It marks another setback for what has been one of Wall Street’s hottest products.
ARKK was caught up in a sell-off across pricey parts of the market, in particular the tech sector, as inflation fears grow and bond yields rise. ARKK’s largest holding, Tesla Inc., dropped 4.9% on Thursday and is now down 14% over three days. Among some of the fund’s other big investments, Square Inc. slumped 6.7% and Roku Inc. fell 2.6%.
“In a low growth world where rates are low, inflation expectations are low and GDP growth is low, those types of companies have done well,” said Ross Mayfield, investment strategy analyst at Baird, about ARKK’s holdings. “When bond yields spike, when economically sensitive areas of the market like energy and financials are outperforming, those are the kinds of companies that are first in line to take it on the chin.”
