ARK Invest’s flagship ARK Innovation Fund has slipped 45% since February, and Cathie Wood, the chief executive of ARK Invest, informed investors she is sharing their pain.
Higher interest rates may make stocks, especially those with high growth, less attractive due to the squeezed valuation of earnings of present values.
“The rise in real rates should not be hurting equity markets, or economic activity, at least until they move into positive territory, or even as long as real rates are below the real potential growth.”
Volatility is becoming an increasingly popular asset class because it offers investors protection and potential profits. Therefore, options volumes are now comparable to stock volumes.
Dealer hedging shapes the negative-gamma conditions that worsen price directions, pushing the markets more varying and prone to even lower prices and raising the need for protection. The market will likely become more unstable as long as volatility is high and equities are in negative gamma. However, decreased prices and increased demand for protection may lead to a market rebound.