Cathie Wood's ARKK rallied against back-to-back 75bp Fed hikes, but can it take on a third?

Sep. 20, 2022 9:58 AM ETARK Innovation ETF (ARKK), SPY, VOO, IVVARKG, ARKQ, ARKW, ARKF, ARKXBy: Jason Capul, SA News Editor26 Comments

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Cathie Wood’s flagship ARK Innovation ETF (NYSEARCA:ARKK) has fared relatively well against the Federal Reserve’s recent back-to-back 75-basis-point hikes. But can it weather a potential third significant hike?

The majority of market participants are expecting Powell to hit Wall Street with a three-quarter-point hike, with some forecasting a 100-basis-point move higher.

Taking a look back in time to the first 75-basis-point hike on June 16, ARKK has since been able to gain 12.9%, which is more than double the returns the S&P 500 mirroring ETFs (NYSEARCA:SPY), (NYSEARCA:VOO) and (NYSEARCA:IVV) as they experienced positive returns of 4.8%.

The June 16 hike resulted in ARKK surging 23.3% over its next five sessions. Moreover, ARKK ended positive in each of those five days.

Following up on the July 28 75-basis-point rate hike, ARKK rallied 13.4% over its next seven sessions, which, again, ended in the green each time.

Time will tell if ARKK can make it a hat trick. Additionally, the innovation-based fund may also have to take on a 100-basis-point move higher in rates. Ahead of the announcement, Wall Street is pricing in an 82% chance that it will see a 75-basis-point hike versus the 18% chance the central bank will announce a 100-basis-point rate hike.

Cathie Wood’s innovation-focused ETFs along with their year-to-date price action: (ARKK) -56.5%, (ARKW) -57.6%, (ARKF) -57.8%, (ARKG) -43.9%, (ARKQ) -36.2%, and (ARKX) -28.3%.

While everyone sees Powell raising rates on Wednesday, Wood stands by her deflation stance as she believes the Fed is miscalculating inflation and is making a mistake.

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