The high-growth technology sector has been seeing turbulence since the start of the week.The weakness is being largely observed as investors are exiting major tech players and growth picks amid intensifying fears of increasing inflation and rising interest rates, per a CNBC article. The tech-heavy Nasdaq Composite index fell 2.7% on May 12, seeing a weekly decline of more than 5%. Going by Yahoo Finance data, technology stocks witnessed their worst day since Mar 18.
Weakness was observed in major tech players as shares of Microsoft
MSFT
, Netflix
NFLX
, Amazon
AMZN
and Apple
AAPL
declined more than 2% on May 12. Moreover, Tesla
TSLA
lost more than 4% while Alphabet
GOOGL
was down more than 3% on the same day.
Spooking investors more, the latest data highlighted inflation levels rising at the fastest speed since 2008 in April. Notably, the Consumer Price Index rose 4.2% year over year in comparison with the Dow Jones estimate of a 3.6% rise, per a CNBC article. Going on, the five-year breakeven inflation rate — which measures expectations of inflation five years out — reached its
highest since April 2011
on May 10 while the 10-year breakeven inflation rate — a measure of expectations of inflation in 10 years’ time — rose to its highest since March 2013.
Investors are worried that rising inflation may hurt corporate margins and profits. They are also fearing that the consistent rise in inflation may put pressure on the Federal Reserve to tighten monetary policy, per a CNBC article.
It is worth noting here what Brian Levitt, global market strategist for Invesco, told Yahoo Finance. He said, “we have an accelerating growth environment with the prospects for some inflation. And for investors, when they think about inflation, they tend to move away from tech stocks, because they think of tech stocks as longer-duration assets in which you’re not going to be paid well into the future, and they’d instead rather own parts of the market that are more highly correlated with nominal GDP. ”
Inverse ETFs to Play the Decline
We have highlighted seven leveraged inverse ETFs from the tech space that investors can consider, though these involve a great deal of risk when compared to traditional products. While the strategy is highly beneficial for short-term traders, it could lead to massive losses compared with traditional funds in volatile markets.
Still, for ETF investors, who are bearish on the tech sector for the near term, any of the below-mentioned products could be intriguing options. However, these could be attractive for those with high-risk tolerance.
ProShares UltraShort Technology
REW
The fund seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the daily performance of the Dow Jones U.S. Technology Index. It has attracted $9.1 million in its asset base and charges 95 basis points (bps) in annual fees.
Daily Dow Jones Internet Bear 3X Shares
WEBS
This fund seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite), of the performance of the Dow Jones Internet Composite Index. It has attracted $7.4 million in its asset base and charges 1.07% in annual fees (read:
Top 4 Inverse/Leveraged ETF Areas of Last Week
).
ProShares UltraPro Short QQQ
SQQQ
This ETF provides three times inverse exposure to the daily performance of the Nasdaq-100 Index, charging 95 bps in annual fees. It has AUM of $1.95 billion (read:
Wall Street Plunges: Make Profits From These Inverse ETFs
).
Direxion Daily Cloud Computing Bear 2X Shares
CLDS
This ETF targets the cloud computing segment offering two times inverse exposure to the performance of the Indxx USA Cloud Computing Index. With AUM of $20.9 million, CLDS has expense ratio of 1.07% (read:
7 Best Leveraged/Inverse ETFs Up 20% Plus in March
).
MicroSectors FANG+ Index -3X Inverse Leveraged ETNs
FNGD
This note seeks to offer three times inverse leveraged exposure to the NYSE FANG+ Index, which is an equal-dollar weighted index targeting the highly-traded growth stocks of next-generation technology and tech-enabled companies. The ETN has accumulated $68 million in its asset base. It charges 95 bps in annual fees (read:
7 Inverse ETFs Riding High on Nasdaq Sell-Off
).
Direxion Daily Technology Bear 3x Shares
TECS
This product provides three times inverse exposure to the daily performance of the Technology Select Sector Index. It has amassed about $62.9 million in its asset base while charging 1.10% in fees per year from investors (read:
6 Inverse ETFs Riding High on Tech Sell-Off This Week
).
Direxion Daily Semiconductor Bear 3x Shares
SOXS
This ETF provides three times inverse exposure to the PHLX Semiconductor Sector Index. It charges 1.11% in annual fees. It manages $88.1 million in its asset base.
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