Don't Get Caught Holding Either of These ETFs in Q4

The Fed announced the fourth consecutive three-quarters of a percentage point interest rate hike yesterday, taking the target range of 3.75% to 4%, its highest since January 2008. A similar aggressive pace of monetary policy tightening was last seen in the early 1980s.

After the initial dovish statement, Fed Chairman Jerome Powell reiterated that the central bank would continue to battle the rising prices until it could achieve its long-term inflation target. Powell said that the terminal rate would go higher than expected earlier and that any talk of pausing rate hikes would be “premature.”

The Fed’s rate hikes are expected to push the economy into a recession, putting further pressure on the stock market.

Amid this backdrop, losing ETFs ARK Innovation ETF (ARKK) and SPDR S&P Biotech ETF (XBI) could be best avoided, as they may tumble further.

ARK Innovation ETF (ARKK)

ARKK is the flagship actively managed fund from ARK Invest, an advisory firm led by renowned investor Catherine Wood. The fund seeks to generate long-term capital appreciation by investing in businesses across the globe that seeks to benefit from disruptive innovation.

With $7.67 billion in AUM, ARKK’s top holding is Zoom Video Communications, Inc. (ZM), with a 9.30% weighting, followed by Tesla, Inc. (TSLA), with a 9.14% weighting, and Roku, Inc. (ROKU), with 6.75%. It has a total of 34 holdings.

The fund’s expense ratio of 0.75% compares to the category average of $0.51. Its fund flows came in at a negative $408.10 million over the past three months. It has a beta of 1.56.

ARKK has declined 61.5% year-to-date and 70.4% over the past year to close the last trading session at $36.46. The fund’s NAV was $37.36 as of November 2, 2022.

ARKK’s POWR Ratings reflect its bleak prospects. It has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It also has an F grade for Trade and Buy & Hold and a D for Peer. It is ranked #64 among the 118 funds in the D-rated Technology Equities ETFs group. Click here to view all ratings of ARKK.

SPDR S&P Biotech ETF (XBI)

XBI is an exchange-traded fund launched by State Street Global Advisors, Inc. SSGA Funds Management, Inc manages the fund. It invests in stocks of companies operating across health care, pharmaceuticals, biotechnology, and life sciences sectors. It seeks to track the performance of the S&P Biotechnology Select Industry Index.

With $7.29 billion in AUM, XBI’s top holding is Biogen Inc. (BIIB), which has a 1.45% weighting in the fund, followed by IVERIC bio, Inc. (ISEE) at 1.36%, and Gilead Sciences, Inc. (GILD) at 1.31%. It has a total of 153 holdings.

Its fund flows were negative $259.47 million over the past three months. The fund’s NAV was $81.10 as of November 2, 2022.

XBI has lost 27.5% year-to-date and 38.1% over the past year to close the last trading session at $81.18.

XBI has an overall POWR Rating of D, equating to a Sell. The fund also has a D grade for Trade, Buy & Hold, and Peer.

XBI is ranked #25 among 41 funds in the Health & Biotech ETFs group. Click here to view all ratings of XBI.

ARKK shares were trading at $36.47 per share on Thursday afternoon, up $0.03 (+0.08%). Year-to-date, ARKK has declined -61.44%, versus a -20.51% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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