Last week was mixed for Wall Street. The S&P 500 (up 1.57%), the Dow Jones (up 1.36%), the Nasdaq Composite (down 0.58%) and the small-cap Russell 2000 (down 2.89%) were all on a volatile ride due to tax hike fears and still-existing rising rate worries.
Rise in global COVID-19 cases also wreaked havoc on the investing world. The third wave of coronavirus has hit Europe hard with extension of lockdown measures in several countries. India has also been reporting rising virus cases despite vaccinations (read:
5 Safe ETFs to Play as Coronavirus Cases Rise Globally).
Further, the latest comments from Fed Chairman Jerome Powell also weighed on investors’ sentiment. The central bank said that it would gradually roll back its monthly bond purchases as the economy continues to improve. The Fed currently purchases $120 billion in bonds per month. Moreover, the rout in the tech space went on last week due to overvaluation concerns (read:
Time to Buy These Undervalued Tech ETFs on the Dip?).
Against this backdrop, below we highlight a few inverse/leveraged ETF areas that won last week.
Direxion Daily S&P Biotech Bear 3X Shares ( LABD Quick Quote LABD - Free Report) – Up 22.9%
The underlying S&P Biotechnology Select Industry Index is designed to measure the performance of a sub-industry or group of sub-industries determined by the Global Industry Classification Standards (GICS).
Biotech is a high-growth area and hence tends to underperform in a rising rate environment. Moreover, many of the biotech stocks surged in the health emergency last year and thus, carry ripe valuation at the current level.
Homebuilders & Suppliers Bull 3X Direxion ( NAIL Quick Quote NAIL - Free Report) – Up 16.5%
The housing sector has been well-positioned despite rising home prices. The still-stay-at-home culture due to the pandemic has resulted in high demand for big homes, as buyers now want specific spaces for working, schooling and exercising at home. The post-pandemic world has led to a demographic shift with millennials being the largest emerging homebuyers. According to the
source, about 79% of millennials are first-time buyers (read: Homebuilding ETFs Standing Tall Amid Rising Costs). Microsectors Fang+ -3X ETN ( FNGD Quick Quote FNGD - Free Report) – Up 11.9%
The underlying NYSE FANG+ Index includes 10 highly liquid stocks that represent a segment of the technology and consumer discretionary sectors consisting of highly-traded growth stocks of technology and tech-enabled companies.
Tech stocks including the FAANGs were hurt last week as the tech selloff continued. Higher rates are negative for the technology sector. Moreover, overvaluation concerns amid the surge in pandemic-ridden 2020 also put tech stocks in a vulnerable spot.
Junior Gold Miners Bear 3X Direxion ( JDST Quick Quote JDST - Free Report) – Up 11.3%
The underlying MVIS Global Junior Gold Miners Index is a cap-weighted total return index. It covers the largest and most liquid small-cap companies that derive 50%+ from Gold or Silver mining or have properties to do so.
We have seen rise in oil prices in the late last week due to Suez Canal blockage incidents which hampered meaningfully large global seaborne trade. Several vessels that are waiting in transit are carrying crude products. Since gold mining companies use crude as a raw material, rise in crude prices is a negative for the former (read:
ETFs to Win/Lose on Suez Canal Blockage). Ultrashort MSCI Brazil Proshares ( BZQ Quick Quote BZQ - Free Report) – Up 10.9%
The fund looks to see daily investment results, before fees and expenses, which correspond to two times the inverse of the daily performance of the MSCI Brazil 25/50 Index. Brazilian stocks slumped last week on
fear of growing government interference.
The continued spread of the coronavirus in Brazil has hurt the economic recovery. Apart from fear of growing red tape, higher inflationary concerns and rising rates have hit this Latin American stock market.
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