Growth stocks in the S&P 500 are back and tech is hot — playing right into Cathie Wood’s hands. But even the famed investor can’t outperform a cheap index.
Wood’s flagship ARK Innovation ETF (ARKK) is having a good year — up 12.74%, making it the tenth-best diversified ETF this year. But the popular fund is still trailing behind the popular $167 billion-in-assets Invesco QQQ Trust (QQQ), which is up 17.3% this year, says Morningstar Direct.
And it’s not just this year that ARK Innovation is lagging the QQQ, which simply owns the 100 largest nonfinancial stocks trading on the Nasdaq. ARK Innovation also trails the Nasdaq 100 in both the past three and five years as well. And get this: QQQ only charges 0.2% annually, or 73% less than ARK Innovation’s 0.75% fee. That’s not to mention the cheaper version of QQQ, Invesco Nasdaq 100 ETF (QQQM), which costs just 0.15%.
“We have seen megacap companies found in growth ETF QQQ to be stronger performers in 2023 than more moderately sized companies more commonly found in disruptive technology ETFs,” said Todd Rosenbluth, director of research at VettaFi.
Rise Of Big Cap Tech
Why such a disconnect between ARK Invest and QQQ when growth is in again? Think big-cap tech, says Rosenbluth.
Just six stocks, all of which are also in the Nasdaq 100, are driving 80% of the S&P 500’s gains this year. That includes Apple (AAPL), Microsoft (MSFT), Meta Platforms (META), Nvidia (NVDA), Amazon.com (AMZN) and Alphabet (GOOGL). All are racing higher this year.
These six stocks also collectively account for 50% the value of the Nasdaq 100. But not one of them is in ARK Innovation. That omission is costly now. Take Meta, a social media giant that’s reorganizing itself to lower costs. Shares are up 99% this year, pushing the company’s value to $616 billion. That’s significant as it means Meta is now more valuable that Tesla (TSLA), which is ARK Innovation’s most important holding at 9.7% of the portfolio.
Tesla has done well, it’s up 22.7%, but it’s still lagging most of the Nasdaq giant. Apple, Nvidia and Amazon are up 29%, 85.5% and 30.9% respectively. The Nasdaq 100, which also owns Tesla, is up 14.11% and 14.82% in the past three and five years annualized. ARK Innovation is down 12% and 1% during the same periods
So while growth stocks are indeed back, they’re not all back equally. “Growth investing comes in many shapes and sizes and it is important for investors to understand what they own,” Rosenbluth said.
Biggest S&P 500 Gainers All Nasdaq Giants
None of the top performers this year are in ARK Innovation
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
