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5 Leveraged, Inverse ETFs Winning at the Start of 2024
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Wall Street’s rally hit a pause at the start of 2024. Overstretched valuations and uncertainty about the timing of Fed rate cuts have dampened investors’ optimism. The S&P 500 is up 0.3%, while the Nasdaq Composite Index — an outperformer in 2023 — and Dow Jones are down 0.3% each in the initial two weeks of 2024.
As a result, the demand for leveraged and inverse-leveraged ETFs has increased as these fetch outsized returns on quick market turns in a short span. We highlight a bunch of the best-performing leveraged or inverse leveraged ETFs that have gained in double digits in the past couple of weeks. These include AdvisorShares MSOS 2x Daily ETF (MSOX - Free Report) , MAX Auto Industry -3x Inverse Leveraged ETN (CARD - Free Report) , UltraPro Short Russell2000 (SRTY - Free Report) , MicroSectors Gold Miners -3X Inverse Leveraged ETN (GDXD - Free Report) and Daily S&P 500 High Beta Bear 3X Shares (HIBS - Free Report) . The funds will remain investors’ darlings, provided sentiments remain volatile.
The latest Fed minutes show that the central bank wouldn’t cut rates as aggressively as expected for this year. This suggests an uncertain path toward interest rate cuts and reflects a growing sense that inflation is under control (read: 4 ETF Zones Beating the Market to Start 2024).
The latest data on inflation, which came in modestly hotter than expected, has dampened market expectations about an interest rate hike as soon as March. Though the job data report for December came in stronger than expected, it also cast doubt on the expectations of March rate cuts. The disappointing manufacturing data also added to the chaos. The U.S. manufacturing sector slipped further into contraction during December, according to the latest PMI data from S&P Global, as output declined and the downturn in new orders gathered pace.
While the timing of interest rate cuts is uncertain, the Fed penciled in three rate cuts for this year in its last meeting. This shift in its monetary policy approach is a result of gradual control of inflation and aims to support a stable economic environment without triggering a recession or a significant rise in unemployment. Lower interest rates generally lead to reduced borrowing costs, which can stimulate economic growth.
Leveraged and Inverse-Leveraged ETFs
Leveraged and inverse-leveraged ETFs either create a leveraged long/short position, an inverse long/short position, or a leveraged inverse long/short position in the underlying index through the use of swaps, options, futures contracts or other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period, provided the trend remains a friend (see: all the Inverse Equity ETFs here).
However, these funds run the risk of huge losses compared to traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as weeks or months).
Investors should note that these products are suitable only for short-term traders as these are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than they appear.
AdvisorShares MSOS 2x Daily ETF is designed for sophisticated investors looking to gain magnified exposure to the U.S. cannabis sector. It offers exposure by normally investing in swap agreements on the AdvisorShares Pure US Cannabis ETF (MSOS). AdvisorShares MSOS 2x Daily ETF has accumulated $35.4 million in its asset base. It charges 1.13% in annual fees and trades in a volume of 422,000 shares a day on average (read: Cannabis ETFs Spike on Marijuana Classification Review).
MAX Auto Industry -3x Inverse Leveraged ETN (CARD - Free Report) – Up 30.9%
MAX Auto Industry -3x Inverse Leveraged ETN seeks to offer three times inverse exposure to the daily performance of the Prime Auto Industry Index. It charges 95 bps in annual fees and has accumulated $3.2 million in its asset base. MAX Auto Industry -3x Inverse Leveraged ETN trades in an average daily volume of about 1,000 shares.
ProShares UltraPro Short Russell2000 (SRTY - Free Report) – Up 12.1%
ProShares UltraPro Short Russell2000 targets the small-cap segment of the broad stock market, offering three times inverse exposure to the performance of the Russell 2000 Index.
With AUM of $138 million, ProShares UltraPro Short Russell2000 has an expense ratio of 0.95% and trades in an average daily volume of 1.1 million shares.
MicroSectors Gold Miners -3X Inverse Leveraged ETN seeks to offer three times inverse leveraged exposure to the S-Network MicroSectors Gold Miners Index (read: Inverse ETFs Soar at the Start of 2024).
MicroSectors Gold Miners -3X Inverse Leveraged ETN has accumulated $50 million in its asset base and trades in an average daily volume of 2 million shares. It charges 95 bps in annual fees.
Daily S&P 500 High Beta Bear 3X Shares (HIBS - Free Report) – Up 11.1%
Daily S&P 500 High Beta Bear 3X Shares offers three times inverse exposure to the performance of the S&P 500 High Beta Index. It has gathered $47.4 million in its asset base and trades in an average daily volume of 172,000 shares.
Daily S&P 500 High Beta Bear 3X Shares charges 95 bps in fees per year from investors.
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5 Leveraged, Inverse ETFs Winning at the Start of 2024
Wall Street’s rally hit a pause at the start of 2024. Overstretched valuations and uncertainty about the timing of Fed rate cuts have dampened investors’ optimism. The S&P 500 is up 0.3%, while the Nasdaq Composite Index — an outperformer in 2023 — and Dow Jones are down 0.3% each in the initial two weeks of 2024.
As a result, the demand for leveraged and inverse-leveraged ETFs has increased as these fetch outsized returns on quick market turns in a short span. We highlight a bunch of the best-performing leveraged or inverse leveraged ETFs that have gained in double digits in the past couple of weeks. These include AdvisorShares MSOS 2x Daily ETF (MSOX - Free Report) , MAX Auto Industry -3x Inverse Leveraged ETN (CARD - Free Report) , UltraPro Short Russell2000 (SRTY - Free Report) , MicroSectors Gold Miners -3X Inverse Leveraged ETN (GDXD - Free Report) and Daily S&P 500 High Beta Bear 3X Shares (HIBS - Free Report) . The funds will remain investors’ darlings, provided sentiments remain volatile.
The latest Fed minutes show that the central bank wouldn’t cut rates as aggressively as expected for this year. This suggests an uncertain path toward interest rate cuts and reflects a growing sense that inflation is under control (read: 4 ETF Zones Beating the Market to Start 2024).
The latest data on inflation, which came in modestly hotter than expected, has dampened market expectations about an interest rate hike as soon as March. Though the job data report for December came in stronger than expected, it also cast doubt on the expectations of March rate cuts. The disappointing manufacturing data also added to the chaos. The U.S. manufacturing sector slipped further into contraction during December, according to the latest PMI data from S&P Global, as output declined and the downturn in new orders gathered pace.
While the timing of interest rate cuts is uncertain, the Fed penciled in three rate cuts for this year in its last meeting. This shift in its monetary policy approach is a result of gradual control of inflation and aims to support a stable economic environment without triggering a recession or a significant rise in unemployment. Lower interest rates generally lead to reduced borrowing costs, which can stimulate economic growth.
Leveraged and Inverse-Leveraged ETFs
Leveraged and inverse-leveraged ETFs either create a leveraged long/short position, an inverse long/short position, or a leveraged inverse long/short position in the underlying index through the use of swaps, options, futures contracts or other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period, provided the trend remains a friend (see: all the Inverse Equity ETFs here).
However, these funds run the risk of huge losses compared to traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as weeks or months).
Investors should note that these products are suitable only for short-term traders as these are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than they appear.
AdvisorShares MSOS 2x Daily ETF (MSOX - Free Report) – Up 32.6%
AdvisorShares MSOS 2x Daily ETF is designed for sophisticated investors looking to gain magnified exposure to the U.S. cannabis sector. It offers exposure by normally investing in swap agreements on the AdvisorShares Pure US Cannabis ETF (MSOS). AdvisorShares MSOS 2x Daily ETF has accumulated $35.4 million in its asset base. It charges 1.13% in annual fees and trades in a volume of 422,000 shares a day on average (read: Cannabis ETFs Spike on Marijuana Classification Review).
MAX Auto Industry -3x Inverse Leveraged ETN (CARD - Free Report) – Up 30.9%
MAX Auto Industry -3x Inverse Leveraged ETN seeks to offer three times inverse exposure to the daily performance of the Prime Auto Industry Index. It charges 95 bps in annual fees and has accumulated $3.2 million in its asset base. MAX Auto Industry -3x Inverse Leveraged ETN trades in an average daily volume of about 1,000 shares.
ProShares UltraPro Short Russell2000 (SRTY - Free Report) – Up 12.1%
ProShares UltraPro Short Russell2000 targets the small-cap segment of the broad stock market, offering three times inverse exposure to the performance of the Russell 2000 Index.
With AUM of $138 million, ProShares UltraPro Short Russell2000 has an expense ratio of 0.95% and trades in an average daily volume of 1.1 million shares.
MicroSectors Gold Miners -3X Inverse Leveraged ETN (GDXD - Free Report) – Up 12.1%
MicroSectors Gold Miners -3X Inverse Leveraged ETN seeks to offer three times inverse leveraged exposure to the S-Network MicroSectors Gold Miners Index (read: Inverse ETFs Soar at the Start of 2024).
MicroSectors Gold Miners -3X Inverse Leveraged ETN has accumulated $50 million in its asset base and trades in an average daily volume of 2 million shares. It charges 95 bps in annual fees.
Daily S&P 500 High Beta Bear 3X Shares (HIBS - Free Report) – Up 11.1%
Daily S&P 500 High Beta Bear 3X Shares offers three times inverse exposure to the performance of the S&P 500 High Beta Index. It has gathered $47.4 million in its asset base and trades in an average daily volume of 172,000 shares.
Daily S&P 500 High Beta Bear 3X Shares charges 95 bps in fees per year from investors.