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Best Inverse/Leveraged ETF Areas of Last Week

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Wall Street was downbeat last week with the S&P 500 (down 0.9%), the Dow Jones (down 0.2%), the Nasdaq Composite (down 1.6%) and the Russell 2000 (down 1.4%) all losing moderately. With the persistently skyrocketing inflation and the Fed’s aggressive monetary policy, the U.S. economy has been witnessing slow growth. The yield curve continued to remain inverted, indicating recession (read: Yield Curve Inverts Most Since 2000: Defensive ETFs in Focus).

The benchmark treasury yield hovered in the range of 2.91% to 2.99% last week while the two-year U.S. treasury yield moved within the range of 3.03% to 3.15% last week. Annual inflation rate in the United States increased to 9.1% in June from a 41-year high of 8.8% in April, per tradingeconomics, but above market forecasts of 8.8%.

Energy prices jumped 41.6% due to rise in gasoline prices (59.9%, the largest increase since March 1980), fuel oil (98.5%), electricity (13.7%, the largest increase since April 2006), and natural gas (38.4%, the largest increase since October 2005). Food costs jumped 10.4%, the most since February 1981, with food at home jumping 12.2%, the most since April 1979.

Prices also surged massively for shelter (5.6%), household furnishings and operations (9.5%), new vehicles (11.4%), used cars and trucks (1.7%), and airline fares (34.1%). Core CPI which excludes food and energy rose 5.9%, slightly below 6% in May, but above forecasts of 5.7% (read: 5 ETFs to Ride High Amid Red-Hot Inflation).

Against this backdrop, below we highlight a few inverse leveraged ETFs that surged materially last week.

ETFs in Focus

Inverse/Leveraged Gold Mining

Invesco DB US Dollar Index Bullish Fund (UUP - Free Report) was flat last week. This went against gold investing as gold prices move inversely with the greenback. Gold bullion ETF GLD was down 1.5% last week. This weighed on gold mining ETFs too and inverse leveraged gold mining ETFs gained materially.

Gold Miners Bear 2X Direxion (DUST - Free Report) – Up 11.62%

Junior Gold Mine Bear 3X Direxion (JDST) – Up 7.4%

Inverse/Leveraged Emerging Markets

The same holds true for the emerging market bloc. This segment also underperforms in a rising dollar environment.

Emerging Markets Bear 3X Direxion (EDZ - Free Report) – Up 10.6%

Inverse/Leveraged Silver

Silver prices underperformed considerably last week as the silver bullion ETF SLV lost 2.2% last week. Silver is also considered an industrial metal. Since recessionary fears are rife now in the United States, speculation of an industrial slowdown is also prevalent. This in turn hurt silver prices.

Ultrashort Silver ETF (ZSL - Free Report) – Up 5.9%

Inverse/leveraged Small-Caps

Small-Cap companies and stocks tend to do well in a growing economy. With widespread U.S. recessionary talks, small -caps have every reason to underperform last week.

Smallcap Bear 3X Direxion (TZA - Free Report) – Up 3.9%

Ultrapro Short Russell 2000 ETF (SRTY) – Up 3.9%

Inverse/Leveraged Basic Materials

There is strong speculation that the U.S. economy will witness a recession in the second quarter of this year after a contraction in the first quarter. If it happens, the slowdown in economic activity is understandable, which in turn will weigh on materials stocks.  

Ultrashort Basic Materials ETF (SMN - Free Report) – Up 3.6%