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Wall Street had a very rough start to 2022, largely due to rising 10-year Treasury yields. In fact, all major indices are in red zone for the month so far. The S&P 500 index has declined about 7.5% in the first month of 2022, witnessing its worst month since March 2020. Moreover, the Dow Jones Industrial Average and the Nasdaq Composite are also down 5.4% and 11.4%, respectively, so far in January.
Presently, market participants remain concerned about the uncertainty surrounding the pandemic, the fate of the fourth-quarter earnings season and the Federal Reserve’s decision to hike the interest rates sooner.
The Federal Reserve Open Market Committee’s two-day meeting will start on Jan 25. Post the meeting, the central bank is expected to give some hint on its decision on taking a more aggressive approach to policy tightening in 2022, considering the consistently hot inflation levels.
The Federal Reserve has already started tapering the bond purchases, which it expects to complete by March. The Fed is expected to begin raising its benchmark interest rate in March. It may take a more aggressive approach to raise interest rates.
In this regard, Ann Miletti, head of active equity at Allspring Global Investments, has also commented that “The greatest fear is how the Fed reacts and keeps this balancing act. There’s going to be a lot of turbulence as we march through these next couple of months,” per a CNBC article.
Inverse ETFs Up More Than 50% YTD
Here we highlight some Inverse ETFs that are up more than 50% so far in 2022.
However, investors need to note that these products are extremely volatile and suitable only for short-term traders. These trades can lead to huge losses compared with the traditional funds during turbulent market conditions. Meanwhile, market participants may enjoy higher returns in a short period of time, provided the trend remains in favor, largely due to the compounding effect in these products. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures.
Direxion Daily S&P Biotech Bear 3X Shares (LABD - Free Report) — up 83.1% year to date
The Direxion Daily S&P Biotech Bear 3X Shares seek daily investment results, before fees and expenses, of 300% of the inverse (or opposite), of the performance of the S&P Biotechnology Select Industry Index.
With AUM of $54.8 million, the Direxion Daily S&P Biotech Bear 3X Shares has an expense ratio of 1.07%.
The return on the MicroSectors FANG & Innovation -3X Inverse Leveraged ETNs is linked to a three times inverse leveraged participation in the Index's performance, compounded daily, minus the applicable fees. The ETNs provide inverse levered exposure to the Solactive FANG Innovation Index. The index is a total return index that tracks the stock prices of 15 large-capitalization U.S. technology stocks, including eight specific core components. The ETN seeks a return on the underlying index for a single day.
The MicroSectors FANG & Innovation -3X Inverse Leveraged ETNs has an expense ratio of 0.95% along with AUM of $3.8 million.
Direxion Daily Dow Jones Internet Bear 3X Shares (WEBS - Free Report) — up 54.3%
The Direxion Daily Dow Jones Internet Bear 3X Shares seek daily investment results, before fees and expenses, 300% of the inverse (or opposite), of the performance of the Dow Jones Internet Composite Index.
With AUM of $11.3 million, the Direxion Daily Dow Jones Internet Bear 3X Shares has an expense ratio of 1.07%.
MicroSectors FANG+ Index -3X Inverse Leveraged ETNs (FNGD - Free Report) — up 50.9%
The return on the MicroSectors FANG+ Index -3X Inverse Leveraged Exchange Traded Notes is linked to a three times inverse leveraged participation in the Index's performance, compounded daily, minus the applicable fees. The ETNs provide inverse levered exposure to the NYSE FANG+ Index.
With AUM of $75.8 million, the MicroSectors FANG+ Index -3X Inverse Leveraged Exchange Traded Notes has an expense ratio of 0.95%.
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Take a Look at Inverse ETFs Up More Than 50% YTD
Wall Street had a very rough start to 2022, largely due to rising 10-year Treasury yields. In fact, all major indices are in red zone for the month so far. The S&P 500 index has declined about 7.5% in the first month of 2022, witnessing its worst month since March 2020. Moreover, the Dow Jones Industrial Average and the Nasdaq Composite are also down 5.4% and 11.4%, respectively, so far in January.
Presently, market participants remain concerned about the uncertainty surrounding the pandemic, the fate of the fourth-quarter earnings season and the Federal Reserve’s decision to hike the interest rates sooner.
The Federal Reserve Open Market Committee’s two-day meeting will start on Jan 25. Post the meeting, the central bank is expected to give some hint on its decision on taking a more aggressive approach to policy tightening in 2022, considering the consistently hot inflation levels.
The Federal Reserve has already started tapering the bond purchases, which it expects to complete by March. The Fed is expected to begin raising its benchmark interest rate in March. It may take a more aggressive approach to raise interest rates.
In this regard, Ann Miletti, head of active equity at Allspring Global Investments, has also commented that “The greatest fear is how the Fed reacts and keeps this balancing act. There’s going to be a lot of turbulence as we march through these next couple of months,” per a CNBC article.
Inverse ETFs Up More Than 50% YTD
Here we highlight some Inverse ETFs that are up more than 50% so far in 2022.
However, investors need to note that these products are extremely volatile and suitable only for short-term traders. These trades can lead to huge losses compared with the traditional funds during turbulent market conditions. Meanwhile, market participants may enjoy higher returns in a short period of time, provided the trend remains in favor, largely due to the compounding effect in these products. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures.
Direxion Daily S&P Biotech Bear 3X Shares (LABD - Free Report) — up 83.1% year to date
The Direxion Daily S&P Biotech Bear 3X Shares seek daily investment results, before fees and expenses, of 300% of the inverse (or opposite), of the performance of the S&P Biotechnology Select Industry Index.
With AUM of $54.8 million, the Direxion Daily S&P Biotech Bear 3X Shares has an expense ratio of 1.07%.
MicroSectors FANG & Innovation -3X Inverse Leveraged ETNs (BERZ - Free Report) — up 61.1%
The return on the MicroSectors FANG & Innovation -3X Inverse Leveraged ETNs is linked to a three times inverse leveraged participation in the Index's performance, compounded daily, minus the applicable fees. The ETNs provide inverse levered exposure to the Solactive FANG Innovation Index. The index is a total return index that tracks the stock prices of 15 large-capitalization U.S. technology stocks, including eight specific core components. The ETN seeks a return on the underlying index for a single day.
The MicroSectors FANG & Innovation -3X Inverse Leveraged ETNs has an expense ratio of 0.95% along with AUM of $3.8 million.
Direxion Daily Dow Jones Internet Bear 3X Shares (WEBS - Free Report) — up 54.3%
The Direxion Daily Dow Jones Internet Bear 3X Shares seek daily investment results, before fees and expenses, 300% of the inverse (or opposite), of the performance of the Dow Jones Internet Composite Index.
With AUM of $11.3 million, the Direxion Daily Dow Jones Internet Bear 3X Shares has an expense ratio of 1.07%.
MicroSectors FANG+ Index -3X Inverse Leveraged ETNs (FNGD - Free Report) — up 50.9%
The return on the MicroSectors FANG+ Index -3X Inverse Leveraged Exchange Traded Notes is linked to a three times inverse leveraged participation in the Index's performance, compounded daily, minus the applicable fees. The ETNs provide inverse levered exposure to the NYSE FANG+ Index.
With AUM of $75.8 million, the MicroSectors FANG+ Index -3X Inverse Leveraged Exchange Traded Notes has an expense ratio of 0.95%.