ARKG ETF

The Health Care Select Sector SPDR ETF (XLV) was up approximately 6% year-to-date as of January 29. While it is still early days, this performance is already twice as robust as the sector ETF's performance for all of 2024.

Don't look now, but Cathie Wood of Ark Invest is fresh off an impressive comeback year, with her broader basket of disruptive technology funds posting high double-digit percentage returns.

Over recent years, investors have sought safety within mega-cap tech stocks while searching for alpha within disruptive technology trends like artificial intelligence. Most investors can agree the AI theme has long-term growth potential, and the current market sell-off is a short-term hiccup.

On this week's episode of ETF Prime, Roxanna Islam, CFA, CAIA, head of sector & industry research at VettaFi, joined host Nate Geraci. The two discussed top ETF performers and trends this year as well as long-established asset managers finally joining the ETF industry.

I maintain a buy rating on ARK Genomic Revolution ETF (ARKG) due to improving momentum, potential lower interest rates, and a favorable M&A environment in 2025. Despite a 20% decline in 2024, ARKG's technical chart shows bullish potential with key support at $21-$22 and resistance at $28. ARKG is a small, actively managed ETF focused on genomics, with high exposure to small-cap stocks and a diversified mix of value, blend, and growth.

Wall Street was upbeat last week with the Dow Jones and the S&P 500 hitting all-time highs last week.

ARKG's top holdings were replaced due to poor performance, highlighting the fund's vulnerability to interest rate changes and high concentration in cash-burning companies. ARKG underperformed significantly compared to peers and the Nasdaq, especially during tighter monetary conditions, due to its concentrated portfolio and high valuation multiples. Virtus, with a more diversified and less concentrated portfolio, outperformed ARKG, suggesting that ARKG needs restructuring to better handle interest rate changes.

Ark Funds pull exclusively from different slivers of the technology sector that also tend to be the most volatile. Economic conditions can make a bigger performance difference over the long term than most investors might expect.

Wall Street roared back after a sell-off early in the month as fears of recession eased. The technology sector, which bore the biggest brunt, rebounded strongly and once again led the market over the past week.