Wed, 18 May 2022

The Ark is starting to leak

Evertise
17 Jan 2022, 18:24 GMT+10

There seems to be some misunderstanding about what exactly is happening with Ark funds. Known by most investors as one of the best-performing funds of this century, Ark has recently found some hurdles. The valuations across most of its holdings seem to be collapsing. This coupled with the fact that Ark owns most of the same names across all of its ETFs makes this a dangerous situation to face

Growth investors are adapting to this new macroeconomic environment

Central banks are currently preparing to raise rates. Due to the persistence of inflation across many countries, it is the only solution central banks have in order to try to combat inflation. What this means is that some of the growth stocks that Ark owned are now faced with an increase in the cost of capital. This makes it more difficult for these companies to get funding, and their interest expenses may rise in 2022.

As a consequence of this new macroeconomic scenario, the valuations of these growth stocks have come back down to reality. Going forward, we could see several investors turn into value investors overnight. An interesting scenario, as there is a real possibility that over the next few years value stocks might perform a lot better than growth stocks.

As an investor, you have to adapt. Being an investor means we have to adapt our strategies and approaches to the everchanging reality across the world. In this case, investors will seriously have to review their portfolios and consider whether some stocks should even be included in there. We could have a clear rotation towards value stocks, which would in turn make the valuations across the markets more even. The valuations of growth stocks could continue to go down, and some of the investors selling these names could easily rotate towards value stocks.

More Sacramento News

Access More

Sign up for Sacramento News

a daily newsletter full of things to discuss over drinks.and the great thing is that it's on the house!