Last few days, the stock market has been steadily rising. A drop of only 0.9% in the S&P 500 over the last two sessions seems to have made some traders nervous. Wall Street’s “fear gauge,” the CBOE VIX index VIX -3.53%, has gone up 11% since the end of last week, when it hit its lowest level in five months. It shows how volatile stocks are expected to be.
It’s true that the sudden change in popular momentum on Monday raised some eyebrows, and some experts say it’s a sign of even more weakness to come. The S&P 500 SPX +0.71% closed down on Tuesday, too, but this time people didn’t buy the dip.
The S&P 500 is still up 26.5% so far this year, and it is only 1% below its all-time high. In fact, the standard for stocks has gone up 5.6% since the day before the election in the U.S.
That’s important because the so-called “Trump trade,” which is betting on stocks that will do well under the new president’s policies, is a big part of the recent rise. If an investor thinks the Trump trade is still going strong, there’s a way to take advantage of the trend that might surprise some.
Cathie Wood is an investment manager who is best known for her ARK Innovation exchange-traded fund ARKK +1.16%. This fund rode the tech and meme stock boom at the beginning of the decade with positions like Tesla.
TSLA went up 2.98 percent, Roku went up 1.87 percent, and Twilio went up 2.5 percent. But after going up 150% in 2020 and reaching a new high of over $150 in February 2021, ARKK fell as people stopped buying things in stores. In June, ARKK fell below $40.
But since Donald Trump was re-elected, the ARKK has gone up 27.6%, according to Todd Sohn, an ETF and technical analyst at Strategas Securities. Tesla’s comeback and its 10% weighting in the fund have helped a lot.
But there’s a different ARK fund that’s done even better. Sohn says the Next Generation Internet ETF ARKW +2.51% is up 29.5% since the election. This is because it has even more moves that seem to be against Trump than its other ARK peers.
Trump is now seen as being in favor of cryptocurrencies, and the ARKW’s 11.5% stake in the ARK 21Shares Bitcoin ETF ARKB +4.32% has been a big help since bitcoin prices recently hit all-time highs.
The ARKW also has a 10% stake in Tesla and a nearly 5% stake in Palantir Technologies PLTR -0.21%, whose stock has gone up in part because of hopes for more government defense contracts.
Sohn says, “ARKK is the ETF that gets most of the attention, but we’d argue that ARKW is a better proxy for Trump 2.0 because of its exposures.” Here is a list of the stocks. The ones that Sohn thinks are most important are Tesla, bitcoin and crypto derivatives, and defense.
Sohn says that even though the ARK ETFs have done better than the market since the election, money has been leaving some of them, especially the ARKK, during that time.
“With over 2,600 equity ETFs, it shows that there are no guarantees when performance is strong. However, we still strongly believe that ARKW is about as good a proxy for Trump 2.0 as one could find, with heavy exposure to Bitcoin, Crypto derivatives (e.g. COIN +5.68%, HOOD +2.60%), Tesla, and Defense (PLTR -0.42%, RBRK +2.71%),” says Cohn.
