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Cathie Wood’s money will be hit hard in the morning before it rebounds as tech trade stumbles

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Cathie wood

Crystal Mercedes | CNBC

Some called it the “sale of Cathie Wood.”

At its opening on Tuesday, the top name owned by Ark Investment Management was the biggest decline on the market.

Shares of Palantir, Tesla, Roku, Square, Paypal, Teladoc, Baidu, Zillow, Shopify and Spotify have all fallen sharply, often double-digits. Her flagship products, such as the Ark Innovation ETF (ARKK) and the Next Generation Internet ETF (ARKW), were all major holdings of the fund.

Immediately after opening, her flagship Ark Innovation Fund fell 11%. By 10:00 am, 30 minutes after opening, we had already traded more than 8 million shares in one day. By noon, it had traded 30 million shares.

And 30 minutes after the store opened, the sale stopped. The fund closed 3.3%, down about 10% that week.

“It was like a mini panic,” Alec Young of Tactical Alpha told me. “The market is concerned that the Fed is at risk of lagging behind the inflation curve. The market is pricing at higher inflation, which means lower prices for high-tech stocks.”

The market has stopped declining as the Federal Reserve Board Chairman Jay Powell’s parliamentary testimony has been released. Powell reiterated that inflation would never rise to a nasty level. “Monetary policy is accommodative and needs to remain accommodative,” he said.

Are there too many people on the boat?

Still, the damage had already occurred. Fear of high rates may have been the first trigger, but now, as Peter Chill of Academy Securities told me, “People have a lot of long stocks with very high valuations. I know very much about that. “

“Bubbling is now a catalyst, not a rate,” he told me. For the current enthusiast with all of Cathie Wood and Ark Investments, Chill wrote a piece called “Noah’s Ark?” On Tuesday. For the client, “too many people are on the boat. I think a lot of people are betting more than they are happy with their risk appetite,” he told me.

Ark Innovation is about 13% off recent highs.

“I don’t think this is the end. This may be the beginning of relaxation. Everyone thought these were super-safe companies. Her management style is to double her bets and much of this. People who are starting out now think they can’t lose these money, and that’s where the problem arises, “says Tchir.

Most of Ark Innovation’s top 10 stocks were below the Nasdaq on Tuesday before the rebound.

Wood didn’t respond to a request for comment on Tuesday’s deal, but in an interview with CNBC last week, she revealed that she was often a buyer on the day or week when her favorite stock fell sharply. Liquidity providers, when people sell, we buy, and when people buy, and these are retail and institutional investors, we are likely to profit. “

Regarding interest rate concerns, he said there is no doubt that a sharp rise would have a negative impact on the portfolio. “I believe valuations will be reset if interest rates rise sharply. Our portfolio will be the first choice for that valuation reset.”

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