ARKK ETF’s 1-year performance is six times that of the S&P 500: Will it keep going?

ARK Innovation ETF’s Comeback

Led by Cathie Wood, the ARK Innovation ETF (ARKK) actively seeks out Wall Street’s most transformative companies. Unlike passive ETFs such as the S&P 500 index ETF (SPY), Wood and her research team continuously modify ARKK’s positions based on evolving trends and their investment goals. Rather than hunting for value like Warren Buffett, Wood aims to identify next-gen technologies that could thrive.

ARKK’s Rollercoaster Ride During COVID

Wood’s focus on innovative companies might seem risky, but it has proven successful under certain conditions. Following the pandemic’s onset in 2020, aided by government stimulus and increased liquidity, ARKK stocks soared from around $33 to about $160 within a year. However, as inflation fears and slow growth set in, the bull market shifted, and ARKK’s value plummeted to under $40, hitting unprofitable stocks hard.

Kathy Wood Regains Momentum

Many investors found themselves in a tricky position after COVID, yet Wood and her team have managed to turn things around. Over the past year, ARKK has significantly outperformed the S&P 500, returning 61.26% compared to the S&P’s 9.87%.

Some might dismiss a one-year return as merely a “dead cat bounce,” but there are three reasons to think Wood’s recent success might continue through 2026:

A Favorable Market for ARKK: Technology stocks are currently benefiting, as evidenced by the Nasdaq 100 index ETF (QQQ) climbing from around $400 to over $500. High-growth stocks like Tesla (TSLA), Roblox (RBLX), and Robinhood Markets (HOOD) typically excel in a bullish environment.

ARKK’s Focus on Growth: The sectors ARKK targets—artificial intelligence, automation, and digital assets—are poised to succeed in the coming years, as these technologies transition from concepts to profitable ventures.

Opportunities in the IPO Market: The IPO landscape often presents prime investment opportunities. For example, Wood’s team declined to invest in Circle Group (CRCL) at its initial offering, but the stock has since surged from $64 to $300. With favorable regulations and a thriving IPO market, Wood is well-positioned.