Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / Why ARKK and Cathie Wood Are Surging in a Bull Market
Transcript
- Lucas: Luna, I want to talk about a number that jumped off the screen today. ARKK, Cathie Wood's flagship innovation ETF, is up six-point-one percent in the last five trading days. That's more than double the S&P 500's two-point-five percent gain. Luna: Six point one percent in a week? That's not just a bounce, that's a statement. Especially after the last two years where ARKK got absolutely crushed. Lucas: Right. And the context matters here. The broader market's been grinding higher all year, but tech-heavy growth funds like ARKK lagged badly. Now suddenly, it's leading. The Russell 2000, which tracks small caps, is up four percent in the same period. That's also outperforming the S&P. Luna: So we're seeing a rotation into small caps and high-beta names. The kind of trade that says investors are feeling more optimistic about the economy. Lucas: Exactly. And the Fed's tone is a big part of it. The effective fed funds rate came down a hair in May to three-point-six-three percent, and the daily rate is essentially flat. But the market is pricing in a soft landing — lower rates later this year. That's oxygen for innovation stocks. Luna: Let's get specific. ARKK's top holdings — what's moving? I saw CrowdStrike is up seven-point-four percent this week. Lucas: CrowdStrike, ticker c r w d, absolutely soaring. And Datadog, d d o g, up four-point-three percent. These are companies with strong fundamentals but high valuations, so they're sensitive to interest rate expectations. When the market smells a rate cut, they rally hard. Luna: And Shopify, another big ARKK holding, up two-point-two percent. Not as dramatic, but still solid in a week where the Nasdaq gained three-point-eight percent. Lucas: Shopify's a good bellwether for the e-commerce thesis. But I think the bigger story is the shift in investor psychology. For most of '24 and '25, the market favored quality and low leverage. Now it's rewarding the opposite. Luna: So is this a dead-cat bounce or the start of a real rotation? Because ARKK is still down a lot from its peaks. Lucas: That's the million-dollar question. Let's look at the numbers. ARKK is at seventy-nine-point-five-seven as of today. Its all-time high was around one-fifty-nine in early 2021. So it's still roughly half from the peak. Luna: Right. So even with this week's surge, it's a long way back. But momentum can be self-reinforcing in a bull market. Lucas: Especially when retail investors are piling in. The SpaceX IPO this week is a perfect example. People are hungry for high-growth stories, and they're willing to pay up. Ron Baron bought another billion dollars' worth of SpaceX shares in the IPO, bringing his total stake to twenty-five billion. Luna: That's a huge vote of confidence from a seasoned investor. But retail investors got very few shares in that IPO. So where does that energy go? Into other high-beta names like CrowdStrike and Datadog, maybe. Lucas: That's exactly the argument for ARKK's recent performance. It's a portfolio of the kind of stocks people want to own but can't get in the IPO market. Cathie Wood calls it 'innovation at scale'. Luna: One thing I find interesting is that Cloudflare is actually down zero-point-four percent this week. That's a contrast. Why would one innovation stock lag while others surge? Lucas: Cloudflare's been a battleground stock. It had a big run earlier in the year, and maybe it's taking a breather. But also, its revenue growth rate has decelerated a bit. The market is punishing any sign of weakness. Luna: So the rotation isn't uniform. It's selective. The market is rewarding companies that can show accelerating growth or a clear catalyst. Lucas: Exactly. CrowdStrike had a strong earnings report last quarter, and Datadog's cloud monitoring business is benefiting from AI workloads. Those are concrete stories. ARKK's portfolio is full of them. Luna: Let's talk about the macro picture. Real GDP growth annualized at one-point-six percent, up from zero-point-five. That's not booming, but it's steady. And the Fed seems comfortable with rates where they are. Lucas: Steady growth plus a dovish Fed is a sweet spot for risk assets. The question is whether it persists. If inflation reaccelerates, the rotation back into value could be violent. Luna: But for now, the momentum is with ARKK. Six percent in a week is hard to ignore. I'm curious how much of that is short covering versus genuine new money. Lucas: We don't have the short interest data for this week yet, but ARKK has historically had a lot of bears. A move like this could be partly a squeeze. But the volume has been heavy, so I think there's real buying. Luna: If you're an investor watching this, what's the takeaway? Is it too late to chase, or is this just the beginning? Lucas: I think the key is to watch the Russell 2000. If small caps continue to lead, that's a bullish signal for innovation stocks. If the S&P starts to catch up, the rotation may be fading. Luna: And keep an eye on the ten-year Treasury yield. If it drops below four percent, that's another green light for ARKK and its peers. Lucas: Speaking of keeping an eye on things — and this is totally off the main thread — we should mention that this show, like every Fexingo show, runs without any ads. If our money conversations have helped you think about a decision differently, you can support that ad-free choice at buy me a coffee dot com slash fexingo. It's a small gesture that keeps us independent. Luna: Absolutely. We love being able to talk about whatever we find interesting, without having to plug some wealth management product. That link is buy me a coffee dot com slash fexingo. Lucas: So back to the rotation. I think the biggest risk right now is that the market gets too far ahead of itself. ARKK's surge in one week is a lot. If we get one bad CPI print, all of this could reverse. Luna: That's the nature of high-beta investing. The gains are fast, but the drawdowns are brutal. ARKK investors learned that in 2022. Lucas: But for this moment, the bulls are in control. The S&P 500 is at seven thousand five hundred seventy. The Dow is above fifty-one thousand nine hundred. And the Russell is showing signs of life. That's a healthy market, not just a narrow one. Luna: I'll be watching ARKK at the close. If it holds above eighty, that could be a psychological breakout. Lucas: It closed at seventy-nine-point-five-seven today. A push above eighty would be interesting. But even if it doesn't, this week has already changed the narrative around innovation stocks. Luna: Narrative matters in a bull market. And right now, the story is that risk is back. Lucas: It is. And for better or worse, that's what drives markets like this one.