May’s volatility is giving way to a June bounce and when the inner bull or inner bear is speaking to an exchange-traded fund investor, it’s difficult to know which side to play. For this conundrum, investors can actually play both sides with added leverage via ProShares ETFs.
For the bulls, there’s the ProShares Ultra S&P500 (NYSEArca: SSO), which seeks daily investment results, that correspond to two times (2x) the daily performance of the S&P 500. This leveraged ProShares ETF seeks a return that is 2x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next.
“Despite a difficult May, the case for optimism in equities isn’t all that difficult to make. Just look at the fundamentals,” wrote ProShares senior investment strategist Kieran Kirwan. “Yes, it’s clear that earnings growth is decelerating, as we documented last month. The S&P 500 delivered earnings growth in the neighborhood of 25% during the first three quarters of 2018. Those levels were simply not sustainable. And while the final tally on S&P 500 earnings for Q1 was slightly negative (-0.4%), revenue growth was positive at 5.3% (per FactSet data).”
On the flip side, global growth concerns and a more cautious Federal Reserve will help if you’re a bear when it comes to the S&P 500, particularly the ProShares Short S&P 500 (NYSEArca: SH). For investors who are predisposed to a long-bias strategy can look at ETFs like the SH ETF if they want to get tactical and take the other side when markets go awry.
Certainly investors want the broad market index like the S&P 500 to be performing well, but there are times when they need to bring out their inner bear with the SH ETF.
SH seeks daily investment results that correspond to the inverse (-1x) of the daily performance of the S&P 500® Index, and invests in financial instruments that ProShare Advisors feel will produce daily returns consistent with the fund’s investment objective.
SH primarily tracks the large-cap U.S. stock market performance. SH is a float-adjusted, market capitalization-weighted index of 500 U.S. operating companies and real estate investment trusts selected through a process that factors in criteria such as liquidity, price, market capitalization and financial viability.
With an upcoming interest rate policy announcement, Chairman Jerome Powell could make mention to the strength of the economy with the current low unemployment rate. While fears of a global economic slowdown exist, the central bank could ease fears by continuing to speak about strength in the U.S. even if growth does slow down.
“We continue to expect that the American economy will continue to grow at a solid pace in 2019 although likely lower than the very strong pace in 2018,” said Powell earlier this year after keeping interest rates unchanged. “We believe our current policy stance is appropriate.”
“Since last year, we’ve noted some developments at home and around the world that bear our close attention,” Powell added. “Given the overall favorable conditions in our economy, my colleagues and I will be patient in assessing what, if any, changes in the stance of policy may be needed.”
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