We acknowledge that a risk-off market environment has pushed investors back toward benchmarks during the last two years, disadvantaging strategies that focus on disruptive innovation. While innovation solves problems and typically gains traction during difficult times, some companies may be cutting back on research and development and other investments to build cash as a buffer against the fallout from higher interest rates.
Fear of the future is palpable these days, but crisis historically has created opportunities.1 According to the latest BofA Fund Manager Survey, cash levels have not been this high since the 9/11 crisis in 2001, and investors are overweight bonds for the first time since April 2009. In December, the CBOE equity put/call ratio2 surged above 2.0,3 the highest level on record, surpassing the ratios in both the tech and telecom bubble and the Global Financial Crisis. In hindsight, both of those times were terrific opportunities to put funds to work in highly differentiated ways. To the extent investors have reserves of cash to put to work, ARK believes that this time will be no different and that innovation strategies will be prime beneficiaries when equity markets recover.
As you can see from our newsletters, ARK Invest is focused on the commercialization of new technologies during the next five years. In our final newsletter this year, we feature the likely proliferation of early-stage cancer screening tests that will save lives, artificial intelligence as the “assembly line” that will boost knowledge worker productivity dramatically, and the accelerated pace of rocket launches and space exploration thanks to private sector participation and Wright’s Law. As many know, ARK has centered its research on Wright’s Law, which differentiates our strategies. I do not believe that you will find this kind of research in most traditional financial institutions, highlighting ARK Invest’s role as a diversification strategy for asset allocators.
With many thanks for your support of ARK and the innovation that we believe will solve problems and transform the world in profound ways,
 “Be fearful when others are greedy, and greedy when others are fearful.” — Warren Buffett. “In the midst of every crisis lies great opportunity.” — Albert Einstein.  Readers may consult Investopedia for further information on the put-call ratio. According to Investopedia, the put-call ratio is a measurement widely used by investors to gauge the overall mood of a market. A “put” or put option is a right to sell an asset at a predetermined price. A “call” or call option is a right to buy an asset at a predetermined price. If traders are buying more puts than calls, it signals a rise in bearish sentiment. If they are buying more calls than puts, it suggests that they see a bull market ahead. The put-call ratio is calculated by dividing the number of traded put options by the number of traded call options. A put-call ratio of 1 indicates that the number of buyers of calls is the same as the number of buyers for puts. However, a ratio of 1 is not an accurate starting point to measure sentiment in the market because there are normally more investors buying calls than buying puts. So, an average put-call ratio of 0.7 for equities is considered a good basis for evaluating sentiment.  The Chicago Board Options Exchange’s (CBOE) Equity Put/Call Ratio hit 2.03 on December 21st, 2022.