Inverse Technology

Inverse ETFs allow traders to benefit from price declines and inverse gearing (-2x and -3x) will magnify the returns, either positive (in a down market) or negative (in an up market)

These trading instruments are not recommended as long-term holdings and ETF providers target desired returns against their underlying indices on a daily basis

However, inverse ETFs are valuable tools

• to hedge a portfolio of long-term investments in uncertain times
• or, simply as indicators of market reversals

An extreme case of hedging by an investor holding on to a portfolio position in the ARK Innovation flagship fund would have been the AXS Short Innovation ETF , which shorted ARK Innovation and benefitted from the heavy losses suffered by the Technology highflyer...before the recent sharp reversal (and run-up)...

The inverse technology ETF SARK is also the benchmark of this selection

As trend indicators, inverse ETFs chart relevant information, performance of inverse technology funds will be evaluated over various time frames and across key technology industry drivers 

• over time, sharp price corrections are followed by periods of stabilization, underscoring investment windows
• great disparities between the various industries of the technology sector preclude any notion of tech firms being equally exposed to market upheaval...

In the current economic environment, with flagging consumer demand, supply chain bottlenecks and rising rates constraining access to capital, the Technology sector might be at risk after a unique run in 2023, but this may not come true of the entire tech sector simultaneously

The diversity of the sector, hightlighted by the inverse funds, will not lend itself to clear-cut anticipations

By virtue of diversification and often capital-weighted, most sector funds smooth performance and signal large cap trends

Within the segment, mega-cap funds, and their inverse counterparts – such as MicroSectors™ FANG+™ Index -3X Inverse Leveraged ETN   add to the ambiguity, because investors may hold on to the growth record of Tech giants in uncertain times, contributing to rebalance the dismal performance of many start-ups

Specialized tech industries bring further nuance to anticipations with diverging trends of concentrated large cap growth industries such as out-performing semiconductors and  of narrow segments of high P/E, high beta companies– such as cloud computing Invalid tag asset or internet  

Over the various time frames, risk exposure of the funds remains widely distributed

By controlling for performance of the ETFs and ETNs of the selection over short time frames, shifts in market anticipations will be highlighted

Check performance and volatility from 1 week to 1 month - on tab at top right of your screen