The Stock Market’s Dominoes Are Falling

The Stock Market’s Dominoes Are Falling

The first domino to topple was ARK Innovation ETF (ARKK). The most celebrated fund of the previous year, having scored a 156% return, ARKK began 2021 where it had left off. By January 25, it had already gained another 18%. The sky was the fund’s target. That day marked the fund’s peak. Manager Cathie Wood would garner further headlines, but the fund has been retreating for a full year now.

The same week also marked the top for meme stocks. Based largely on social-media enthusiasm, such issues boomed during late 2020. As with ARKK, those stocks started 2021 with a bang but quickly fizzled. Bed, Bath, & Beyond (BBBY), Peloton Interactive (PTON), and most notably GameStop (GME), posted their all-time highs in January. (AMC Entertainment (AMC) lasted for a few more months, but it too subsided.) A slew of recent articles have buried meme-stock investing, but the truth is that those securities have long been dead on their feet.

Also struggling have been special-purpose acquisition companies, or SPACs. Although new SPACs continue to be launched, most notably Digital World Acquisition Corporation (DWAC) (covered last week in this space), SPACs that completed corporate mergers have crumbled over the over the past year. From February through September of 2021, reported Goldman Sachs, an index of SPACs trailed the S&P 500 by 49