August has historically been a slow month for equities. While some of the air from this year’s rally has been slowly escaping, inverse exchange-traded funds (ETFs) have benefited—three Direxion funds in particular.
China’s furious rally at the start of the year has been met with skepticism as the country’s real estate development issues continue. Real estate comprises a sizeable portion of gross domestic product (almost 30% of the country’s GDP), so a real estate slowdown stemming from the Evergrande Crisis is trickling over into the overall economy.
For bullish investors in Chinese equities, that’s not the news they want to hear. However, short-term traders in the Daily FTSE China Bear 3X Shares (YANG) have been rewarded with over 40% gains within the past month.
China’s government is already trying to reform its real estate sector again, such as making loan qualifications less stringent for prospective property buyers. Until these stimulus measures actually alleviate the growth headaches, it will be interesting to see how the equities market responds.
S&P and Tech Bears Rewarded
Big tech has been spearheading the rally thus far in 2023, but the rally would have to take a breather at some point. Inflation has proven to be more stubborn than initially anticipated, and more rate hikes won’t do big tech any favors.
As such, the Direxion Daily Technology Bear 3X ETF (TECS) has risen 27% within the past month. TECS seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite) of the daily performance of the Technology Select Sector Index, provided by S&P Dow Jones Indices, and includes domestic companies from the technology sector.
Big tech names are prominent in the S&P 500, with Apple at the top of the heap. Given this, a pullback in big tech will spill over the S&P 500.
That’s evident in the Direxion Daily S&P 500 Bear 3X ETF (SPXS), up about 50% in the past 30 days. SPXS seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.
All three funds speak to the dynamic ability of inverse ETFs to generate profits when the tide shifts and the markets pull back. Since they all have triple leverage, seasoned traders can maximize their gains should their bearish notions prove correct.
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