Breaking News
Investing Pro 0
Cyber Monday SALE: Up to 54% OFF InvestingPro+ CLAIM OFFER

2 Short-Term Defensive ETFs To Help Tackle Market Instability

By Investing.com (Tezcan Gecgil/Investing.com )ETFsMar 07, 2022 10:11
uk.investing.com/analysis/2-shortterm-defensive-etfs-to-help-tackle-market-instability-200512178
2 Short-Term Defensive ETFs To Help Tackle Market Instability
By Investing.com (Tezcan Gecgil/Investing.com )   |  Mar 07, 2022 10:11
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
DJUSNC
-0.10%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BABA
-3.82%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
SSNLF
0.00%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
TCEHY
-4.71%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
MSCIEF
-0.48%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
SZK
+0.41%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Inverse exchange-traded funds (ETFs) are getting increased attention as market worries escalate. Russia’s invasion of Ukraine has fired up already jittery risk sentiment, pushing major indices even lower. Since the start of the year, the S&P 500 and NASDAQ 100 have lost 9.0% and 15.2%.

Recent research by Colby J. Pessina and Robert E. Whaley of Vanderbilt University highlights:

"The main attraction of geared levered and inverse funds is that they offer an inexpensive, convenient, limited-liability means for profiting from a directional price view."

The authors, however, also point out:

"The problem with these products is that they are not generally well understood… They are unstable and exist only as a mechanism for placing short-term directional bets."

Regular readers would know that we frequently cover inverse ETFs, which use derivative products to provide short exposure to daily returns of various indices, sectors, or asset classes. Today’s article introduces two more such funds that might appeal to experienced short-term traders that make directional bets.

However, we should once again remind readers that these products are typically not appropriate for most retail investors.

1. ProShares UltraShort MSCI Emerging Markets

  • Current Price: $20.35
  • 52 Week Range: $14.29 - $20.39
  • Expense Ratio: 0.95%

The ProShares UltraShort MSCI Emerging Markets (NYSE:EEV) seeks daily investment results that replicate two times the inverse performance (or -2x) of the MSCI Emerging Markets Index. In other words, it is both an inverse and a leveraged fund. EEV could appeal to traders who want to profit from daily declines in emerging markets (EMs).

EEV Weekly
EEV Weekly

The MSCI Emerging Markets Index includes 1,420 EM companies. Chinese companies account for almost a third of the index, followed by Taiwan (16.09%), South Korea (12.81%), and India (12.45%).

Military developments in Eastern Europe have put the focus on EMs. Readers might be interested to know that last week, MSCI, the New York City-based provider of an array of global financial instruments and indices, said it would be taking Russia out of EM indices.

EEV started trading in October 2007, and has $8.4 million in net assets. The leading companies in the index include Taiwan Semiconductor Manufacturing (NYSE:TSM), Tencent (HK:0700) (OTC:TCEHY), Samsung (OTC:SSNLF), Alibaba (NYSE:BABA) and Infosys (NYSE:INFY).

EEV could be an effective one-day bet against the MSCI Emerging Markets index. However, due to the compounding of daily returns, holding periods longer than one day can easily result in returns that are substantially different than the objective.

Year-to-date, EEV is up almost 18.7% in 2022. It also returned 26.4% over the past year.

By comparison, the iShares MSCI Emerging Markets ETF (NYSE:EEM) which tracks the MSCI Emerging Markets Index declined 8.6% this year and 17.1% in the past 12 months.

2. ProShares UltraShort Consumer Goods

  • Current Price: $13.64
  • 52-Week Range: $10.41 - $20.12
  • Expense Ratio: 0.95% per year

Our second fund, the ProShares UltraShort Consumer Goods ETF (NYSE:SZK), provides daily investment results replicating two times the inverse (or -2x) exposure of the Dow Jones U.S. Consumer Goods Index. The index measures the stock performance of 108 consumer goods companies stateside.

SZK Weekly
SZK Weekly

Food, Beverage & Tobacco companies lead the index with 32.18%; next in line are Automobiles & Components (30.17%), Household & Personal Products (16.96%), and Consumer Durables & Apparel (15.27%) names.

Among the leading stocks in the index are Tesla (NASDAQ:TSLA), Procter & Gamble (NYSE:PG), Coca-Cola (NNYSE:KO), Nike (NYSE:NKE), Mondelez International (NASDAQ:MDLZ) and General Motors (NYSE:GM).

SZK aims to profit from a market decline in these consumer goods companies while extending the short-term outlook with a daily 2x leverage. The fund was listed in January 2007, and net assets stand at almost $1 million.

So far in the year, SZK is up about 21.6%. However, over the past 12 months, the inverse fund has declined almost 30%.

Meanwhile, the Dow Jones U.S. Consumer Goods Index is down 13.5% in 2022, and 2.2% in the past year. Economists have been paying close attention to the mood of the US consumer. Economic and geopolitical concerns as well as supply chain issues have been overshadowing the more positive development regarding the declining number of COVID-19 cases.

Therefore, short-term traders who expect US consumer shares to come under further pressure could use this inverse leveraged fund as a daily trading tool. However, they need to appreciate that it is not appropriate as a long-term investment.

2 Short-Term Defensive ETFs To Help Tackle Market Instability
 

Related Articles

2 Short-Term Defensive ETFs To Help Tackle Market Instability

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email