By Carleton English 

After a brutal 2022, investors in Cathie Wood's ARK Innovation ETF finally have a reason to smile.

The fund is up 27.4% in January, notching its best monthly performance since being launched in 2014. To be sure, that gain comes after ARK Innovation (ticker: ARKK) plunged 67% in 2022 as investors' taste for growth-oriented stocks soured amid the Federal Reserve's rapid interest-rate increases last year. That drop came after a 24% decline in 2021 following a 148% gain in 2020.

The new year so far has brought more optimism among investors as Wall Street increasingly believes that the Fed will be able to engineer a so-called soft landing, bringing inflation under control by raising interest rates without triggering a recession. So far this year, the S&P 500 has gained 5.6% while the tech-weighted Nasdaq Composite has advanced 10%. The latter's performance is especially meaningful for ARK Innovation, which invests in tech names.

Tesla $(TSLA)$ was among the greatest contributors to the fund's performance. It is up nearly 40% this year, including an 11% jump last week after posting record profits for the fourth quarter. Shares of the electric-vehicle maker account for more than 9% of ARK Innovation's holdings.

Roku $(ROKU)$, which accounts for 6.7% of the ARK Innovation fund's portfolio, also saw its shares rise roughly 40% this month as investors have gained renewed faith in streaming-oriented companies. This bullishness came after Netflix $(NFLX)$ said earlier this month that it added 7.7 million net new subscribers in the fourth quarter, far ahead of forecasts of 4.5 million.

And even though investors have shown some skittishness around cryptocurrencies, crypto-exchange Coinbase $(COIN)$ has seen its shares climb 67% this year. Coinbase accounts for 4.5% of ARK Innovation's holdings.

Despite a challenging 2022, Cathie Wood has been an aggressive buyer of stocks like Tesla and Coinbase this year. In a recent interview with Barron's, she defended her bullish stance, believing that a new era of disruption is about to come and that the companies in her portfolio will be leading it.

"That was just a dry run for what we're going to see here now for the next five to 10 years," Wood said of the gains in healthcare and technology that lifted ARK funds at the start of the pandemic. While it's early in the new year, the market seems to agree so far.

Write to Carleton English at carleton.english@dowjones.com

(END) Dow Jones Newswires

January 31, 2023 15:49 ET (20:49 GMT)

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