Welcome to our #96 weekly newsletter.
“For women taking control of their financial future”
-Jana Hlistova
From The Purse
In this week’s newsletter, we focus on Cathie Wood’s Ark Invest fund which has performed less well this year due to investors selling high-growth tech stocks.
Global markets have been rattled by the new Covid variant Omicron, rising inflation and uncertainty regarding the tapering of bond purchases (aka reducing money printing) and the economic outlook.
And don’t forget to listen to The Purse Podcast interview with Fiona O’Donnell McCarthy who is a Principal in True Ventures. We talk about crypto and Web 3.0 and how more women can step into this space. Please enjoy!
I hope you enjoy this week’s newsletter.
Until next week,
Jana
Cathie Wood’s Ark Invest slumps as investors sell high-growth tech stocks
Ark Invest’s strategies are based on transformative technologies and exponential growth.
Global markets have been rattled by the new Covid variant Omicron, rising inflation and uncertainty regarding the tapering of bond purchases (aka reducing money printing) and the economic outlook.
As a result, there has been an ‘ebbing’ of enthusiam for many of the high-growth tech stocks which did well during the pandemic.
Ark Innovation, a flagship exchange traded fund (ETF) for Ark Invest led by CEO and founder Cathie Wood, has extended its losses to 26% in 2021 as investors opt out of tech companies.
As market sentiment sours, investors are selling tech companies because they are (currently) unprofitable, including real estate marketplace Zillow, virtual healthcare company Teladoc, Zoom — the video conference platform, as reported by the Financial Times.
The ETF has fallen more than 40% from its February peak.
In a recent video briefing, Cathie Wood points out that the fund has a 5+ year investment horizon.
She emphasises that the ‘world has changed permanently’ because of the move towards increased digitalisation.
In Cathie’s view, what’s causing indigestion in the market? It could be tax loss selling, it could be leverage in the market place and it could also be algorithmic trading.
She goes on to say, that many people have not seen exponential growth. And they certainly have not seen a convergence of exponential growth trajectories.
For example, consider autonomous taxi networks, convergence of robotics, energy storage and artifical intelligence. According to Ark Invest, this is likely to deliver $10tn in revenues by 2030. Therefore the returns are likely to be ‘phenomenal’ in this space.
Moreover, algorithmic trading is based on ‘what happened in the past’ and and fails to take the future into account. And Ark Invest believes that more than 50% of trading is driven by algorithms in some shape or form.
Cathie goes on to say:
‘Instead of staying home, you should stay connected and stay globally competitive. And businesses need to embrace these new technologies, because they are going to be transformational. And if you don’t embrace them, you’re not going to win…’
Based on Ark Invests strategies, in February of this year they estimated an annualised return of 15% per annum, over a 5 year period (which is more than double the market average).
Today however, Ark Invest believes its strategies will deliver a 40%+ compound annual rate of return, in the next 5 years.
What next?
News in Brief
Financial news
Global stocks gained $3tn in market cap this week as investors reacted to more information about the Omicron variant. The market has began to price out near-term hikes for some central banks and less severe US inflation report. Global stocks now worth $120tn, equal to 142% of global GDP.
US: inflation surged to 6.8% in November, even more than expected, to fastest rate since 1982.
The Bank of England’s (BoE) monetary policy chief has said that inflation is likely to soar to ‘comfortably’ to above 5% next spring when the energy regulator Ofgem raises a price cap affecting millions of households.
Markets think that Omicron plan B will delay rise in interest rates. Fears of economic slowdown mean BoE are less likely to raise interest rates.
The British pound dropped to a one year low as Goldman Sachs joined others in pushing back their forecast for UK’s first post-pandemic rate hike amid uncertainty caused by Omicron variant.
‘Covid variants’ named as the biggest concern for market stability in 2022.
Crypto: bitcoin, ethereum, DeFi & NFTs
Bitcoin is down more than 20% since its all time high and is set for its fourth straight week decline. According to Michael Saylor, the CEO for MicroStrategy, its only legitimate risk is a black swan ie ‘the unknown unknown’.
Bitcoin fell in price as bond yields rose ahead of US inflation report that could seal the deal for a faster unwinding of stimulus by the US Federal Reserve. Bitcoin fell 1.5% to $47,900 in the past 24 hours, with prices down 2.25% for the week. (See today’s bitcoin’s price).
Ethereum showed promising signs of advance this week, although it failed to breach the $4,500 threshold. Today’s price is around $3,996+
On Thursday, Bitcoin and Ethereum fell more than 5% in 24 hours after Chinese real estate developers Evergrande and Kaisa were unable to make scheduled U.S. dollar bond payments.
Polygon rose significantly, up by 13%+ to hit $2.08. On Thursday Polygon announced it signed a $400 million deal with Mir to expand the project’s Ethereum scaling capabilities.
The price of Tezos jumped 37% over Monday night after Ubisoft announced it would tap the blockchain to mint NFTs for its upcoming Ghost Recon game.
Solana took a beating this week. The leading Ethereum competitor dropped almost 13% in the last seven days and currently trades for $169.
The Purse Podcast
We cover the following in our conversation:
How do you define the world of crypto and Web 3.0?
Size of the market and potential for growth
What is going on in this space right now?
Women & diversity in this space (US/globally)
How do you decide who to invest in starups?
and more!
Please enjoy! Listen on all podcasting channels including Spotify and iTunes.
Coffee Break? Read This
We’d love to hear from you. Get in touch with Jana via the The Purse website or tweet @jointhepurse and @janicka.
The Purse Ltd. Copyright 2021 & All Rights Reserved.
The Purse provides content for informational purposes only, we do not recommend products or services or provide investment advice. Please do your own research or speak to a financial advisor.
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