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Inverse ETFs like SH and SPDN could benefit as Middle-East tensions and rising volatility keep U.S. markets under pressure.
Axxcess Wealth Management LLC increased its stake in Direxion Daily S&P 500 Bear 1x Shares (NYSEARCA:SPDN) by 86.9% during the third quarter, according to its most recent filing with the Securities and Exchange Commission. The fund owned 195,605 shares of the company's stock after acquiring an additional 90,925 shares during the quarter.
Direxion Daily S&P 500 Bear 1x Shares (NYSEARCA:SPDN - Get Free Report) was the recipient of a large growth in short interest during the month of December. As of December 15th, there was short interest totaling 1,722,639 shares, a growth of 401.6% from the November 30th total of 343,396 shares. Approximately 13.6% of the shares
The SPDN ETF offers a way to bet against the market, moving inversely to the S&P 500, but it's not for long-term holding. Market's muted response to rate cuts suggests they're already priced in; high S&P 500 P/E ratio supports this sentiment. Weak economic data, potential oil price spikes, and slowing consumer demand could negatively impact market valuations and company earnings.
Wall Street is on the verge of inking a conspicuous downcycle for the week, with the major indices flashing red in late-afternoon trading on Friday. The benchmark S&P 500 is down about 0.7% against Thursday's close, and is about to book a loss of more than 2% for the business week ending July 19.
Wall Street wavered this week on high inflation data which lowered chances of an imminent Fed rate cut. Plus, geopolitical tension in Middle East has weighed on stocks.
While the buy-and-hold strategy makes the most intuitive sense, it's boring, which invariably leads curious investors down the path toward inverse ETFs. Just like any other exchange-traded fund, these bear trades represent a basket of securities under a single umbrella.
Shorting or hedging against companies driving innovation and growth in the US stock markets is not a viable long-term strategy. Historical trends suggest that bear markets are relatively short-lived, and positive trends in the market indicate potential long-term growth for large firms and disruptive innovators. ETFs that bet against innovation and growth are likely to underperform their benchmarks in the long term. It is better to invest in stocks of innovative firms and funds tracking major indexes.