While much of Wall Street is in a state of panic amid the looming banking crisis, one big investor is having a great day. Cathy Wood’s flagship Arc Innovation ETF (ARKK) saw $397 million in new inflows on Tuesday alone, the largest one-day inflow since April 2021, according to FactSet. Investors may be piling up on innovation funds under the belief that the current banking chaos may cause the Federal Reserve to pause its rate hike campaign, which will benefit growth stocks. Wood’s disruptive tech darling has been hit hardest by rising rates over the past year. Wood himself stands by his view that the central bank is making a policy mistake by tightening aggressively because it is ignoring signs of deflation. He expects his innovation stocks to have a great rally when rates stop climbing. Wood said, “Once the Fed stops looking back at CPI inflation and starts addressing the deflationary banking crisis that caused a 19-fold increase in low rates and a yield inverse, then We wouldn’t be surprised to see the return of the Roaring Twenties,” Wood said in a tweet early Wednesday. The market is pricing in no hike when the Fed meets on March 21-22. The probability of halving rose to 65% according to data from CME Group on Wednesday morning. Its flagship ETF, with nearly $6 billion in assets under management, is up more than 5% this week, outperforming the broader market as concerns grew that the collapse of the Silicon Valley bank could have a contagion effect on the banking sector. The ARKK 1Y Mountain Arc Innovation ETF ARKK is up 21% this year as Wood’s top holdings like Tesla and Roku have rebounded dramatically. However, the fund is still 47% away from its recent high. Year-to-date, $100 million has flown into funds actively managed by Wood, the highest in the global equity broad thematic fund category, according to FactSet. The Innovation Fund focuses on advanced technology companies in areas such as genomics, robotics, the Internet and fintech. It currently has 28 stock holdings.
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