Large-Cap Bear ETF Edging Out Small-Cap So Far This Year | ETF Trends

Despite a brief summer rally, bearish traders have been on the right side of the market for most of 2022. Small-caps can make more pronounced market moves, up or down, but in the case of two leveraged exchange traded funds (ETFs), it’s been large-caps that have been exhibiting more bearishness.

In the specific case of the Direxion Daily S&P 500 Bear 3X ETF (SPXS), the fund is up close to 45% for the year. SPXS seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.

Compare that to the Direxion Daily Small Cap Bear 3X Shares (TZA), which is up about 38% for the year. TZA seeks daily investment results equal to 300% of the inverse (or opposite) of the daily performance of the Russell 2000® Index.

Looking specifically at just these two funds, it’s interesting to note that the bigger brother S&P 500 is providing more gains to the bearish side versus the small-cap Russell 2000. As mentioned, the latter typically produces amplified moves whether trending lower or higher, which runs counter to the common thought that with the market down for most of the year, TZA should be pushing higher than SPXS.

Large-cap equities found in the S&P 500 are usually the default play to mute volatile moves to the downside. Either way, bearish traders have been finding profitable opportunities as 2022 starts to wind down.TZA Chart

More Downside Ahead?

Right now, all eyes continue to be on the U.S. Federal Reserve with respect to their interest rate policy. More aggressive hiking will only fan the flames of inflation as well as recession fears, giving bears even more profitable moves.

“It’s a very quiet session thus far,” wrote Adam Crisafulli of Vital Knowledge in a note to clients, according to a CNBC report. “Stocks have climbed off their lows from earlier in the morning, but sentiment is still very gloomy. The consensus playbook for the week seems to be anticipating a brief rally around the FOMC, which most people plan to use as an opportunity to book profits in preparation for further downside (a return to the June lows is thought by many to be inevitable).”

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