Since the 2024 US elections, there has been much speculation about how a second Trump administration will set policies that will impact the economy. Some take a very optimistic view of what lies ahead: A recent report from Goldman Sachs said the likelihood of a recession has decreased along with inflation and that expected changes in tariffs, immigration and other policies are unlikely to drag down economic growth.
Investors who share this view of the broader trajectory of the U.S. economy in the coming quarters will likely be looking for ways to benefit from this growth through their investments, whether through individual stocks, exchange-traded funds (ETFs) or a variety of other vehicles. vehicles. On the other hand, other investors see cause for concern.
Bearish investors are concerned that tariffs under the new administration could be higher and much broader than under the previous Trump administration, which could have a negative impact on consumer spending, prices and inflation. A weak regulatory framework can lead to unexpected changes in business structure, while mass deportations can disrupt the economy by quickly laying off large numbers of workers at once.
If you’re a bearish investor, there are several ways to position your investments to benefit from a market downturn. Inverse leveraged ETFs are some of the most powerful options in this case.
ProShares UltraPro Short S&P 500: Reasonable Fees for Short-Term Bearish Gains
ProShares UltraPro Short S&P 500 Today
ProShares UltraPro Short S&P 500
(As of 11:41 p.m. ET)
- 52 week range
- $21.38
▼
$50.73
- Dividend yield
- 0.32%
- Assets under management
- $494.13 million
ProShares UltraPro Short S&P 500 NYSEARCA:SPXU provides a broad short position in the S&P 500 index, allowing investors to benefit if the index declines. SPXU uses leverage to achieve three times the inverse daily performance of the S&P 500. Thus, when the S&P falls during the day, SPXU holders benefit.
Tracking the S&P 500 in this way allows investors to make a bearish bet on the broader market without having to short-sell individual stocks, industries or sectors. However, given the way SPXU uses leverage, it is only intended to track the S&P on a daily basis. This means it is only suitable for active investors who trade in and out regularly, and not for investors with a buy and hold strategy.
Given the need for frequent trading built into SPXU’s structure, it is not surprising that it has high liquidity based on an average monthly trading volume of nearly 9.5 million. And while investors should expect to pay a premium for an inverse leveraged fund, SPXU’s expense ratio of 0.89% is quite reasonable compared to some of its competitors on both the long and short sides.
ProShares UltraShort Russell2000: Ready for Small-Cap Shares to Reduce
ProShares UltraShort Russell2000 today
ProShares UltraShort Russell2000
(As of 11:27 p.m. ET)
- 52 week range
- $36.93
▼
$77.06
- Dividend yield
- 0.08%
- Assets under management
- $50.53 million
The Russell 2000 index of small-cap stocks has risen more than 8% over the past month as investors generally remain optimistic about the future of tax cuts and increased focus on domestic businesses. However, this group of stocks is also highly exposed to inflation and could easily turn in the other direction.
If this happens, ProShares UltraShort Russell2000 NYSEARCA: TUM could be a good option for investors expecting further declines. Like SPXU, this fund offers inverse leverage exposure, although in this case the index target is the Russell 2000. Also, like SPXU, TWM is designed for daily trading. It provides double the inverse exposure and has a comparable expense ratio, but the fund has a relatively low asset level, which can contribute to volatility.
ProShares UltraShort MSCI Emerging Markets: Preparing if trade policy hurts emerging markets
ProShares UltraShort MSCI Emerging Markets Today
ProShares UltraShort MSCI for Emerging Markets
(As of 10:29 p.m. ET)
- 52 week range
- $14.06
▼
$22.78
- Dividend yield
- 0.35%
- Assets under management
- $5.40 million
A Citigroup report suggests the new administration’s trade policies could hurt emerging markets. Investors who support this view may want to take a look at ProShares UltraShort MSCI Emerging Markets. NYSEARCA:EEVanother 2x daily short leveraged fund focused on the MSCI Emerging Markets Index with approximately 1,300 members.
While this fund does not offer single-country targeting, it does include a representative sample of different industries, sectors and geographies.
Beware of Risk
Leveraged funds typically have a much higher level of risk compared to other ETFs. Bearish investors who are not willing to take on such risk can compare them, for example, to unleveraged inverse funds or other short strategies. However, those willing to take the risk can also reap significant rewards if their bet pays off.
Before you consider the ProShares UltraShort MSCI Emerging Markets, you should hear this.
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