Trivariate: Buy Equal-Weighted S&P 500, Short Ark Innovation

Trivariate Research, a prominent investment research firm, has proposed a contrarian investment strategy. The strategy advocates for a long position in the equal-weighted S&P 500 ETF and a short position in Cathie Wood’s ARK Innovation ETF (ARKK). The firm’s analysis of the relative performance and valuation of these two investment vehicles explains the strategy.

The S&P 500 ETF, a passively managed fund tracking the performance of the S&P 500 index, offers broad exposure to the US stock market. This index is widely regarded as a reliable benchmark for overall market performance. By investing in an equal-weighted S&P 500 ETF, investors can gain exposure to a diversified portfolio of large-cap US stocks, reducing portfolio risk.

In contrast, the ARK Innovation ETF, managed by Cathie Wood, focuses on disruptive innovation themes such as genomics, robotics, and artificial intelligence. While this strategy has the potential for significant upside, it also carries higher risk due to its concentrated portfolio and focus on speculative growth stocks.

Trivariate Research argues that the current market environment favors a more conservative approach, focusing on value stocks and dividend-paying companies. The firm believes that the S&P 500 ETF offers a more attractive investment opportunity with its broad diversification and lower valuation than the higher-risk, higher-volatility ARK Innovation ETF.

However, it is important to note that investing in individual stocks or ETFs involves inherent risks. Investors should conduct thorough research or consult a financial advisor before making investment decisions.