Cathie Wood's ARKK Innovation ETF (ARKK) has experienced a remarkable surge in November, posting a record 31% gain. This significant uptick is fueled by investor optimism over potential US interest rate cuts in 2024, driving growth in riskier assets. ARKK's impressive performance mirrors the success Wood achieved in 2020 with ARK Investment Management. However, the current financial inflows to ARKK, approximately $150 million in November, are modest compared to the billion-dollar monthly inflows witnessed during its peak.
Despite ARKK's remarkable gains, it's facing its first year of net outflows, indicating a shift in investor sentiment. The reduced search interest in Cathie Wood, a stark contrast to her peak popularity during the meme stock era, reflects this changing investor attitude. According to Nate Geraci, President of the ETF Store, many investors remain wary due to past declines, requiring sustained outperformance for a significant return of investor interest.
ARKK's November rally stands out, particularly when contrasted with the performance of mega-cap technology stocks that have dominated most of the year. The ETF's top holdings, including Coinbase (COIN). and Roku (ROKU), have seen over 60% increases, contributing significantly to ARKK's record month. This rally is marked by a shift to risk-on markets, as observed by Jay Hatfield, founder of Infrastructure Capital Management.
While ARKK leads the charge, other ARK Investment Management funds have also seen notable performances, yet all are experiencing net outflows. The broader landscape for actively managed ETFs in the US contrasts starkly with ARKK's situation. Active funds have captured a record share of inflows, with investors favoring systematically managed ETFs and covered call strategies over traditional stock-picking. Despite ARKK's recent success, it remains 70% below its February 2021 peak, while the Nasdaq 100-tracking QQQ has risen about 15% in the same timeframe.
