November’s CPI came in cooler than expected Tuesday, with inflation rising just 0.1% last month. The annual rate of inflation dipped from 7.7% to 7.1% in November, the lowest amount since the end of last year and a notable boost for the stock market. Investors looking for the right tech exposure for 2023 may want to revisit the ARK Innovation ETF (ARKK) as tech could benefit from the CPI bounce.
The tech-heavy Nasdaq Composite rose sharply in the morning and finished the day Tuesday up 1%. It’s been a difficult year for tech stocks as funding for many innovative companies dried up with rising interest rates, and some of the biggest tech firms like Amazon (AMZN) and Meta (META) have had to make layoffs.
Since then, markets have started to signal that they might be anticipating a softer-than-expected landing for the economy next year based on recent, softer CPI reports like November’s. Mutual funds and hedge funds have pushed flows into stocks that could benefit from an overall rebound, in the latest sign that things may be turning around.
While that does benefit sectors like energy and materials, a soft landing could also be good news for tech. ARKK could be a strategy poised for more flows if that becomes the case, offering a particular tech exposure for 2023.
The ETF has added $1.4 billion in one year of net flows with $313 million in net inflows over the last three months. ARKK targets firms that would benefit from “disruptive innovations” like improvements to AI, DNA technologies, and automation, to name a few. Charging 75 basis points, ARKK holds some appealing firms like Block, Inc. (SQ), Teladoc Health (TDOC), and CRISPR Therapeutics (CRSP) which all can make cases for upswings next year.
Finding the right tech exposure in such a complicated new rate regime for tech isn’t the easiest task for investors. While there are a lot of options out there, an actively-managed strategy like ARKK may be the right ETF when looking at the whole of 2023 and all the innovations that markets might see in the months ahead.
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