Cathie Wood’s ARK Funds: A Trump 2.0 Investment Opportunity

The stock market has recently enjoyed a resolute rally, but a two-session dip of just 0.9% in the S&P 500 has caused unease among traders. The CBOE VIX index, known as Wall Street’s fear gauge, has risen 11% from a five-month low. This market volatility has led to growing concerns about potential weaknesses ahead, as significant dip buying has failed to materialize.

Despite this troubling trend, the fundamentals remain strong; the S&P 500 sits less than 1% from its record high and has experienced an impressive 26.5% increase in 2021 alone. The pivotal factor contributing to this surge is what can only be described as the “Trump trade,” wherein traders are betting on stocks poised to benefit from the pro-business policies espoused by the former president. For investors looking to capitalize further, one surprising vehicle stands out: Cathie Wood’s ARK Next Generation Internet ETF (ARKW).

Understanding Cathie Wood and Her ARK Funds

Cathie Wood has garnered a reputation for her foresight and investment acumen through her ARK Innovation ETF (ARKK). This fund experienced explosive growth in early 2020, returning an astonishing 150% and reaching a peak price of over $150 in February 2021. However, ARKK hit a rough patch, dropping below $40 by June of this year, as the retail buying frenzy began to wane.

Yet, as the Trump re-election campaign gained traction, ARKK rebounded, climbing 27.6% since the election victory, buoyed primarily by Tesla’s outstanding performance—accounting for a substantial 10% of the fund. ARK has capitalized on the market’s speculative nature and the prevailing momentum for tech.

The Power of ARKW

Notably, another fund managed by Wood, the ARK Next Generation Internet ETF (ARKW), has outperformed even the ARKK. ARKW has surged by 29.5% post-election due to its stronger assortment of so-called Trump proxies. For one, it boasts an 11.5% investment in the ARK 21Shares Bitcoin ETF (ARKB), positioning it favorably amidst the rising sentiment towards crypto assets.

The Trump Playbook: Crypto, Tesla, and Defense

One cannot overlook the weight of ARKW’s 10% stake in Tesla, a stock often associated with innovation and forward-thinking capitalism. Additionally, the ETF has a near 5% holding in Palantir Technologies (PLTR), which stands to gain from increased defense contracts—a key avenue for revenue with the expanding military budget under a Trump-like administration.

Todd Sohn, ETF and technical strategist at Strategas Securities, believes that while ARKK tends to grab the spotlight, ARKW is a more robust investment vehicle for those keen on benefiting from Trump 2.0 policies. Sohn emphasizes, “ARKW is about as good a proxy for Trump 2.0 as one might find, with heavy exposure to Bitcoin, Crypto derivatives (e.g. Coinbase & Robinhood), Tesla, and Defense,” signifying that this ETF can serve as a focal point for conservative investors looking to ride the Trump wave.

The Broader Picture: Trading and Market Analysis

Even as ARK’s suite of ETFs has managed to stay ahead of the market performance since the elections, it’s worth noting that some funds, particularly ARKK, have witnessed outflows during a time of increased volatility. With over 2,600 equity ETFs in the market, it reveals the daunting reality that exceptional performance doesn’t guarantee inflows from the general public.

That said, the current market setup suggests that dedicated focus on tech and defense, intertwined with the unmistakable growth of the cryptocurrency sector, provides a compelling case for ARKW in this re-shaped economic landscape. As professional and retail traders alike seek safe harbors amidst uncertainty, the traditional financial principles that govern smart investing cannot be overstated.

Conclusion: A Conservative Stance on Tech Investments

The takeaways are clear: for investors aligned with traditional Republican values and looking for a way to engage in the stock market’s momentum, ARK Next Generation Internet ETF (ARKW) offers a strong entry point. With significant stakes in not just tech, but also the burgeoning cryptocurrency space, defense contractors, and the resilient auto sector, ARKW represents a winning strategy for those who believe in the continuity of the Trump-era investment thesis. Balancing sentiment and sound business fundamentals are the keys to a prosperous portfolio as we navigate through these uncertain times.