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Why You Should Tap Inverse ETFs This Week

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The global market kicks off this week with a host of downbeat news. We have a worsening COVID situation in China, sky-high inflation in the United States, slowdown fears both in the United States and Euro zone as well as looming rate hikes by the ECB.

China’s Renewed COVID Cases

China's capital Beijing is experiencing an "explosive" COVID-19 outbreak connected to bars, a government spokesman said on Saturday, as the commercial hub, Shanghai, conducted mass testing to contain a jump in cases tied to a hair salon, as quoted on Reuters.

There is a new tightening of COVID curbs in Beijing since Thursday, with at least two districts closing some entertainment venues. Though China's infection rate is low by global standards, it maintains a zero-COVID policy. China had just started loosening curbs after two-months of strict lockdowns. Now, fresh lockdowns mean renewed supply-chain issues.

High U.S. Inflation

Meanwhile,theannual inflation rate in the United States unexpectedly accelerated to 8.6% in May of 2022, the highest since December 1981 and compared to market forecasts as well as April’s print of 8.3%. Energy prices jumped 34.6%, the most since September of 2005, due to gasoline (48.7%), fuel oil (106.7%, the largest increase on record), electricity (12%, the largest 12-month increase since August 2006), and natural gas (30.2%, the most since July 2008), per tradingeconomics.

Several market experts expect the Fed to hike rates by 75/100 bps in the upcoming meeting. CNBC’s Jim Cramer wants the Fed to raise rates by 100 basis points. However, we expect a 50-bp rate hike like most market participants. But any negative rhetoric from the Fed will send the markets into a tailspin.

ECB to Hike Rates

Meanwhile, the ECB is likely to end its QE program at the start of July. The ECB "intends" to hike rates by 25 bps in July but they may also enact a 50 bps rate hike in September. The new ECB projections expect annual inflation to reach 6.8% in 2022, fall to 3.5% in 2023 and 2.1% in 2024 — higher than in the March projections. Annual real GDP growth projections have been revised down to 2.8% for 2022, and 2.1% for 2023 compared with March projections. However, GDP growth outlook for 2024 has been revised up.

Inverse ETFs in Focus

Against this backdrop, below we highlight a few inverse ETFs that may be tapped this week. Although rate hike worries have been rife globally of late, investors at times are taken aback when news hit the market and markets fall. Hence, markets are likely to remain rocky this week and inverse ETFs may offer some gains.

MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETNs (BNKD - Free Report) – Up 16.9% Past Week

Direxion Daily Technology Bear 3X Shares (TECS - Free Report) – Up 15.4%

Direxion Daily S&P 500 High Beta Bear 3X Shares (HIBS - Free Report) – Up 14.9%

ProShares UltraPro Short S&P500 (SPXU - Free Report) – Up 11.7%

Direxion Daily S&P 500 Bear 3X Shares (SPXS - Free Report) – Up 11.6%

ProShares UltraShort QQQ (QID - Free Report) – Up 9.9%

ProShares UltraShort Financials (SKF - Free Report) – Up 9.5%

ProShares UltraShort Technology (REW - Free Report) – Up 9.5%

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