Skip to main content
A scary good deal on trusted journalism
Get full digital access to globeandmail.com
$0.99
per week for 24 weeks SAVE OVER $140
OFFER ENDS OCTOBER 31
A scary good deal on trusted journalism
$0.99
per week
for 24 weeks
SAVE OVER $140
OFFER ENDS OCTOBER 31
// //

A broad selloff in technology and growth names battered the flagship fund of star stock picker Cathie Wood’s ARK Invest, as investors shifted away from tech shares amid a sharp rise in Treasury yields.

The ARK Innovation ETF, which had $21.4 billion in assets as of last week, according to Refinitiv, was down 3.8% on Tuesday, outpacing a 1.9% drop for the benchmark S&P 500 and a 2.5% fall for the tech-heavy Nasdaq.

Losses have accelerated in recent days, fueled by a rise in Treasury yields that has hit the broader universe of technology and growth stocks in the wake of the Federal Reserve’s monetary policy meeting last week. The central bank took a hawkish tilt at that meeting, which some interpreted as a vote of confidence in the U.S. economy.

Story continues below advertisement

“Anytime we see the 10-year UST yield move such a dramatic amount in a short period of time ... it generally coincides with a market sell-off of some magnitude,” said Brian Price, head of investment management for Commonwealth Financial Network, in a note. “It is not surprising to see value and cyclical stocks hold up better than their growth counterparts given the increase in yields.”

While rising bond yields tend to reduce the relative attractiveness of many stocks, they can particularly weigh on tech and other growth names whose valuations rely more on future cash flows, which are discounted more severely as bond yields rise.

Since Wednesday, the yield on the 10-year U.S. Treasury note has climbed 23 basis points to 1.53%, while the ARKK ETF has fallen over 4% and the Nasdaq is down 2%.

While stock indexes remain near record highs, many individual names have struggled in recent weeks. Half of S&P 500 stocks were down 10% or more from their 52-week highs as of Tuesday afternoon. That included over 60 stocks that had fallen 20% or more.

Wood’s fund, which was the best-performing U.S. equity fund in 2020, is down more than 9% so far this year, while the S&P 500 has gained 16%. The ARKK fund ranks in the lowest percentile year-to-date among 601 mid-cap growth funds tracked by Morningstar.

The high-growth names that helped Wood reap outsized gains during last year’s coronavirus lockdowns have hurt the fund’s performance in 2021, with so-called stay-at-home stocks such as Teladoc Health and Roku losing their luster as investors have turned to financials, energy companies and other economic reopening plays at various times over the last few months.

“What worked for the fund in 2020 has not persisted even if the long-term trends favored by ARK remain relevant,” Todd Rosenbluth, head of ETF & mutual fund research at CFRA, said in an emailed comment.

Story continues below advertisement

Earlier this month, Wood reiterated her call that slowing economic activity in the United States will bolster growth stocks.

ARK Invest had no immediate comment on Tuesday.

Short interest in the ARKK fund amounts to 21.41 million shares, or 11.9% of the float, with short interest declining by 1.1% in the past week as shorts have covered their bets, according to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

The fund’s top holdings include electric car maker Tesla Inc as well as virtual health company Teladoc and television streaming firm Roku. While Tesla has climbed over 9% in 2021, Roku has slumped 5% and Teladoc shares have dropped some 35%.

Last week, China’s moves to crack down on bitcoin trading dealt another blow to the fund, which lists cryptocurrency trading firm Coinbase Global Inc as its fifth-largest holding.

Since its inception in 2014, the ARKK fund is up about 450% against a gain of roughly 115% for the S&P 500, and ranks in the top percentile in its category of funds tracked by Morningstar over a five-year period.

Story continues below advertisement

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies