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Some Think ARK Must Fail For New Bull Market To Really Begin – Validea’s Guru Investor Blog


The stock market will not prosper until ARK Innovation is dead, argues an article inThe Wall Street Journal, citing a Wall Street insider who said he doesn’t believe a bull market will happen until Kathy Wood’s flagship fund collapses completely.

But even though ARK Innovation has lost 75% of its value since its peak in February 2021, it’s still making new money: about $2 billion in 2022 alone. And many investors are holding on to other stocks that have taken a dizzying plunge, such as GameStop. This probably means that we have not yet reached surrender; that moment in the market when everyone gives up and sells out historically indicates that a rebound is imminent. For example, in October 2008, after the S&P 500 lost 38%, many thought it was the bottom, but the bottom didn’t actually hit until March 2009, when the S&P 500 lost 31%. And the Nasdaq Composite has seen 8 rallies in the 2 1/2 years since the March 2000 dotcom crash, the article details.

While some indicators point to a high degree of pessimism among investors, this may have more to do with skyrocketing gas prices and dreary geopolitical headlines, the paper argues. And there is still some optimism that the Fed will change course, leading to a rally. Investors are still afraid of losing if this happens and follow the traditional advice of buying the dip. Such sentiment does not indicate a capitulation, although one measure — Bank of America’s monthly survey of fund managers — did show the highest level of risk-taking below normal since the 2008 financial crisis. And while it may be an exercise in futility to determine exactly when we’ve hit rock bottom, paying close attention to Wood’s ARK may be key, and the fact that it’s still quite popular is a good indication that we probably haven’t yet this.

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