Last week was extremely downbeat for Wall Street. The S&P 500 entered into a bear market on Jun 13. Although stocks entered into a bear territory many times for the past several weeks on an intraday basis, they never closed at that level.
The bets of a 75-bp Fed rate hike this week amid sky-high inflation, ECB’s looming hawkish stance, the Russia-Ukraine war, soaring energy prices and a renewed surge in COVID cases in countries like United Kingdom and China have sent stocks in the bear market. Finally, the Fed enacted a 75-bp rate hike late last week.
The rise in rate was the biggest since 1994. The outcome is a slowdown in economic growth. The Fed downgraded its forecast for 2022 median real GDP growth from 2.8% in March to 1.7% for 2022. It also lowered the growth rate expectations to 1.7% (from 2.2% in March) for 2023 and 1.9% (from 2% in March) for 2024. The unemployment rate is projected to rise from 3.5% to 3.7% for 2022, 3.5% to 3.9% for 2023 and from 3.6% to 4.1% for 2024.
The inflation projection has been upped for this year, while the Fed expects inflation to cool off in 2023 and 2024. The federal funds rate is projected to be 3.4% for 2022 from 1.9% in March, 3.8% for 2023 from 2.8% and 3.4% for 2024 from 2.8%.
As recessionary fears flared up, the S&P 500, the Dow Jones and the Nasdaq Composite and the Russell 2000 lost about 5.8%, 4.8%, 4.7% and 7.5% last week. The yield on the 3-year Treasury yield fell marginally to 3.33% on Jun 16, while the benchmark 10-year Treasury note fell about 5 basis points to 3.28%. This scenario of the inversion of the yield curve indicates that long-term bond yields are under pressure (read: Biggest U.S. Rate Hike Since 1994 in June: 4 ETFs to Win).
Against this backdrop, below, we highlight a few inverse ETFs that won last week.
Direxion Daily S&P 500 High Beta Bear 3X Shares HIBS – Up 23.5% Past Week
Direxion Daily S&P 500 Bear 3X Shares SPXS – Up 17.7%
ProShares UltraPro Short S&P500 (SPXU) – Up 17.6%
Mid & Small Caps
ProShares UltraPro Short MidCap400 SMDD – Up 23.28%
Direxion Daily Small Cap Bear 3X Shares TZA – Up 23.1%
ProShares UltraPro Short Russell2000 (SRTY) – Up 23.0%
ProShares UltraShort Russell2000 (TWM) – Up 15.4%
MicroSectors Solactive FANG & Innovation -3X Inverse Leveraged ETNs BERZ – Up 19.6%
ProShares UltraShort Semiconductors SSG – Up 16.7%
Direxion Daily Technology Bear 3X Shares (TECS) – Up 13.6%
Financial & Real Estate
Direxion Daily Real Estate Bear 3X Shares DRV – Up 15.1%
Direxion Daily Financial Bear 3X Shares FAZ – Up 15%
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