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Another year, another bubble bites the dust.
We’re talking, of course, about the bubble in hypergrowth stocks like those owned by the
ARK Innovation
exchange-traded fund (ticker: ARKK). In this space one year ago, I highlighted the fund and the stocks in it as a potential bubble, and it looks like it has popped. Big holdings like
Roku
(ROKU),
Teladoc Health
(TDOC), and
Zoom Video Communications
(ZM) have tumbled more than 30% over the past year, and ARK Innovation looks set to finish the year down more than 20%, despite a banner year from
Tesla
(TSLA), its largest holding.
Worse still, despite the fund’s fantastic gains since it was launched in 2014—it’s returned more than 340%—its investors have been terrible market timers. They poured billions into the fund during 2020 and the beginning of 2021, driving its flow-weighted price to about $109, according to StoneX strategist Vincent Deluard, or 16% above Wednesday’s close of $93.83.
Big drops often look like big opportunities, but there’s likely more downside ahead for ARK Innovation. 22V Research’s John Roque notes that the ETF’s big drop has left it looking oversold, but it still hasn’t been able to meaningfully rally. It continues to trade below its 40-week moving average, while its chart relative to the
S&P 500
also looks uninspiring. Roque expects the ETF to continue on a downward slide toward $60, or 36% below Wednesday’s close. “[The] inability to bounce after recording an oversold reading suggests firmly that the item in question is not finished going down,” he writes.
The bubble in fast-growing disrupters wasn’t the only one that seemed to pop in 2021. Solar and clean-energy stocks, which soared in 2020, slumped this year, with both the
iShares Global Clean Energy
ETF (ICLN) and the
Invesco Solar
ETF (TAN) off nearly 40% from their 52-week highs. Special purpose acquisition companies, so hot during the last few months of 2020 and into ’21, ultimately fizzled out, with the
…
Read More: Will the Stock Market Bubble Pop Soon? ARK Innovation Bubble Finally