Wood's ARKK Sees Surge in Inflows Amid Silicon Valley Bank Collapse

Bullion Bite
Wood's ARKK Sees Surge in Inflows Amid Silicon Valley Bank Collapse

Last Friday's collapse of Silicon Valley Bank caused the second-largest bank failure in the history of the US, which led to a crash in regional bank stocks and a sharp drop in bond yields such as the US two-year Treasury yield, reminiscent of the Black Monday crash of 1987.

While trading flows indicated a mad dash into safe-haven assets, some investors were doing the opposite: pouring money into Cathie Wood's ARK Innovation ETF (ticker ARKK) on the belief that the regional banking crisis might be enough to persuade the Federal Reserve to pause the most aggressive interest rate hiking cycle in a generation to restore confidence in financial markets.

Those who panic-bought ARKK on the belief that profitless tech companies would surge in a possible shift in Fed policy were not wrong. The overnight index swaps market has so far priced out a 50-basis-point hike for next week's FOMC (with a 75% chance of a 25bps hike) and even priced in the possibility of cuts in the back half of the year.

Bloomberg noted that this was the largest influx into ARKK since April 2021, a few weeks after the fund hit its all-time high in a year that saw investors pour in a whopping $9.6 billion in total.

The inflow came in the midst of the US banking turmoil, which saw several lenders collapse, triggering a wider market panic. In a miserable week for equities, ARKK dropped 11% for its worst performance since September.

It remains to be seen whether the collapse of Silicon Valley Bank will result in a systemic event comparable to previous crises. Nevertheless, some investors have already made moves into the treasury market, rates market, or even speculative tech, recognizing the possibility that the Fed might offer a dovish present next week following the SVB meltdown.

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