By Rachael Green, Benzinga
ARK Innovation ETF (NYSEARCA: ARKK) was an investor darling in the first year of the pandemic with its robust portfolio of COVID-era winners like Zoom (NASDAQ: ZM). But the disruptive tech ETF took a beating in 2022, falling more than 67% throughout the year.
However, this year, ARKK seems to have begun a slow and arduous recovery, gaining over 40% year-to-date despite a widespread selloff this summer. Still, it’s far from its 2020 peak of over $150 per share, and some bullish investors believe the partial recovery this year is a sign that the ETF is ready to regain its former glory. Here’s what’s behind that bullish outlook.
A Potential Upcoming Pause In Rate Hikes As Economic Data Gives Cause For Optimism
Investors remain optimistic that the Federal Reserve will pause interest rate hikes at its upcoming meeting on September 20. In August, key economic indicators were largely mixed but still suggested that inflation was cooling overall.
While consumer prices rose from 3% in June to 3.2% in July, core inflation – consumer prices with food and energy prices stripped out– declined slightly from 4.8% in June to 4.7%. And it’s that core inflation that the Federal Reserve wants to see come down to its 2% target.
If interest rate hikes are paused, the macroeconomic tailwind this month could add more lift to ARKK which has already begun recovering some of its August losses.
Despite Investor Exodus, ARKK Still Has A Potentially Promising Growth Portfolio
ARKK may have missed the explosive AI-generated growth of Nvidia (NASDAQ: NVDA), but the top 10 holdings are dotted with underdog growth stocks. For example, the app and game developer platform Unity Software (NYSE: U) just landed a deal this summer to use Unity’s gaming software in Apple’s (NASDAQ: AAPL) upcoming virtual reality headset, Apple Vision Pro.
Zoom, the video communications platform that’s been relatively neglected by investors after its pandemic-era boom, has been building up a stockpile of cash that now sits at about $6 billion. It’s planning to use that to grow its enterprise vertical, one of its most successful segments. It’s also spending some of that on new AI-enhanced features, like the new AI Companion, a built-in AI-powered assistant that can catch you up on meetings if you’re late, auto-generate meeting summaries, and even give you feedback on your conversational and presenting skills.
You Can Potentially Magnify Your Bullish ARKK Views With the AXS 2X Innovation ETF
For investors who see the summer tumble as a hiccup in ARKK’s overall upward trajectory, AXS Investments has designed a unique leveraged ETF just for you. The AXS 2X Innovation ETF (TARK) seeks 200% of the daily performance of the ARK Innovation ETF.
That 2x leverage gives investors a chance to turn the ETF’s slow and rocky recovery into more substantial gains. That added leverage does increase the risk of using TARK, so it’s important to use it for short-term trades, such as the potential upswing following the Fed’s upcoming meeting. But when used carefully, TARK is a useful tool for traders who are staunchly bullish on disruptive tech and see the periodic panicked selloffs as an opportunity to find yield.
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