The capital markets have already been bracing themselves for rising rates in 2022. What they may not have foreseen is tech sector volatility, which is helping the bears more than the bulls so far this year.
In the case of the Direxion Daily Technology Bear 3X ETF (TECS), it’s up 30% so far. That correlates with the Nasdaq 100 also seeing bearishness with a 12% drop.
It’s difficult to fathom this from the tech sector given its strong run during the pandemic. Social distancing measures brought a heavier reliance on technology, which propelled big tech names to stratospheric gains.
Now, with the economy getting back to form, rising rates amid rampant inflation are the new concern. According to a Reuters article, Nicholas Colas, co-founder of DataTrek Research, says that companies with “a long tail of future expected earnings will tend to decline” as rates move higher.
That said, traders may want to continue riding the upside trend in TECS, which seeks daily investment results equal to 300% of the inverse (or opposite) of the daily performance of the Technology Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the technology sector.
A Bullish Comeback Brewing?
If the tech sector manages to regain its seemingly indomitable strength from the beginning of the pandemic, then traders will want to side with the Direxion Daily Technology Bull 3X ETF (TECL). It takes the opposite side of TECS, capturing upside in the same index.
Also, like TECS with its triple leverage, TECL is certainly not for the weak of heart. The fund seeks daily investment results, before fees and expenses, of 300% of the daily performance of the Technology Select Sector Index.
The fund invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index includes domestic companies from the technology sector.
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