Wall Street registered a decline last week with the S&P 500 (down 2.21%), the Dow Jones (down 1.3%), the Nasdaq (down 4.1%) and the Russell 2000 (down 2.2%) all losing in the 2% to 4% range. The S&P 500 concluded the worst first half since 1970 last week.
S&P Global’s final manufacturing purchasing managers’ index (PMI) for June was revised up to 52.7, which was still the lowest since July 2020, but better than the 52.4 previously reported for the month. However, the Institute for Supply Management’s manufacturing index dipped more than expected to 53.0 for June from 56.1 in May, as an index tracking new orders contracted for the first time in two years.
In fact, not only last week, the entire June was lackluster. The sell-off in the S&P 500 Index aggravated when the Fed raised interest rates by 75 bps in its latest FOMC meeting — the biggest increase since 1994 — and signaled continued tightening ahead, which could further weigh on risk-on trade sentiments.
The strength in the greenback was palpable. Invesco DB US Dollar Index Bullish Fund UUP was up 1.2% last week. The U.S. yield curve again inverted in June after April, giving cues of a likelihood of a recession.
Most investment banks are warning about an impending recession. Deloitte sees about a 15% chance of a U.S. economic recession, as quoted on a New York Times article. Morgan Stanley sees the probability of a recession in the next 12 months at about 30%, according to the bank’s models (read: 5 Winning ETF Areas of a Lackluster June).
Goldman Sachs David Mericle and Ronnie Walker put the odds of a recession in the next year at 30%, up from 15% before. JPMorgan Chase economists raised their expected probability of a recession in the next one year to 35%. So, talks of a U.S. recession will be high in Q3.
Against this backdrop, below we highlight a few best-performing inverse/leveraged ETFs of last week.
Winning Inverse/Leveraged ETFs of Last Week
Semiconductor Bear 3X Direxion SOXS – Up 33%
Semiconductor bellwether Micron Technology last week offered a current-quarter sales forecast that came in far below Wall Street’s estimates, signaling lower ordering for memory chips widely used in computers and smartphones in anticipation of weakening demand among consumers.
The Direxion Daily Semiconductor Bear 3x Shares seeks daily investment results, before fees and expenses, of 300% of the inverse of the performance of the ICE Semiconductor Index. The expense ratio of the fund is 1.01%.
Microsectors Fang & Innovation -3X ETN (BERZ) – Up 24.3%
The MicroSectors FANG & Innovation -3x Inverse Leveraged ETN are linked to a three times leveraged participation in the inverse performance of the Solactive FANG Innovation Index, compounded daily, minus the applicable fees. The fund charges 95 bps in fees.
Ultrashort Semiconductors ETF SSG – Up 21.6%
This is yet another inverse/leveraged semiconductor fund that gained as the space was beaten down badly last week. The ProShares UltraShort Semiconductors seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the Dow Jones U.S. Semiconductors Index. The fund charges 95 bps in fees.
Etfmg Alternative Harvest -2X ETF MJIN – Up 19.3%
The ETFMG 2X Daily Inverse Alternative Harvest ETF seeks daily investment results, before fees and expenses, that correspond to negative two times of the return of the Prime Alternative Harvest Index for a single day. The fund charges 95 bps in fees.
Junior Gold Mine Bear 3X Direxion JDST – Up 14.7%
As the greenback rose last week, gold prices fell. Now wonder, gold mining ETFs too dropped, giving inverse leveraged fund JDST a reason to win. The Direxion Daily Junior Gold Miners Index Bear 2x Shares seek daily investment results, before fees and expenses, of 200% of the inverse of the performance of the MVIS Global Junior Gold Miners Index.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.