shares of the ark innovation etf arkk dropped 8 monday and are now down 686 over the past 12 months arkk fund manager cathie wood said monday morning that the credit default market seems to confirm that the market outlook has significantly worsened what happened on twitter wood said the credit default market seems to be confirming recent warnings from tesla inc tsla ceo elon musk and jpmorgan chase  co jpm ceo jamie dimon that the economy could be in trouble related link ark innovation fund rallies should investors still avoid arkk at all costs credit default swaps seem to be corroborating jamie’s hurricane and elon’s super bad feeling about the economy as measured by markit they have nearly doubled this year surpassing their q4’18 highs and heading toward covidcrisis levels a deflationary signal wood said what is a credit default swap cdss are derivatives that are essentially insurance for bondholders so a pickup in cds levels indicates that investors are becoming worried about the safety of their investments lenders purchase cdss from investors who agree to pay the lender in the event the borrower defaults on its obligations cds played a big role in the volatility in the housing market during the 2008 and 2009 financial crisis contracts are customized among the debt issuer the buyer and the seller cdss trade overthecounter in an illiquid and relatively opaque market making them difficult to track and regulate the price of the united states 5 years cds is up 548 in the past year according to the website world government bonds woods struggles wood rose to popularity when her bets on highrisk speculative investments generated some staggering shortterm returns during the markets recovery from the covid19 selloff in 2020 and 2021 however investors have dumped speculative assets in the past 12 months and the arkk fund has been among the markets worst performers due to its extremely aggressive growth stock strategy in fact wood has significantly underperformed the broad market in the longterm the arkk fund is now down 14 overall in the past three years compared to a 313 gain for the spdr sp 500 etf trust spy in that same stretch benzingas take while woods credibility as a stock picker has understandably been tarnished in the past year her observations about the cds market are certainly valid although with the sp 500 entering bear market territory on monday it seems fairly obvious that the price of insurance against an economic downturn would be on the rise