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
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
Specialized tech industries bring further nuance to anticipations with diverging trends of concentrated large cap growth industries such as out-performing semiconductors
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