Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Bearish Bets Are Dominating ETF Market Like 2008 All Over Again

Stock Markets Jun 22, 2022 08:54AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Bloomberg. A bear statue stands outside the Frankfurt Stock Exchange, operated by Deutsche Boerse AG, in Frankfurt. Photographer: Peter Juelich/Bloomberg

(Bloomberg) -- A booming corner of the $6.2 trillion ETF market is sending ominous signals about the path ahead for US stocks.

Trading in inverse ETFs -- vehicles that win when the market loses -- is eclipsing activity in bullish leveraged products by the widest margin since the financial crisis, according to data from Bloomberg Intelligence. 

That looks like a fresh sign of disintegrating sentiment as the most aggressive Federal Reserve policy since 1994 fuels a bear market with few precedents. Leveraged long funds are almost always more popular than their bearish counterparts as traders seek to supercharge any market gains. 

Now that dip-buying urge is evaporating, being replaced by demand for hedges amid this year’s broad stock losses.

“It makes sense to see inverse ETFs becoming more popular and receiving inflows,” said Peter Chatwell, head of global macro strategies trading at Mizuho International Plc. “For real money investors, downside protection of a portfolio is difficult to come by, particularly in a rising yield environment where government bonds don’t work well as a hedge.”

Usually, fixed income would outperform in a slowing economy, acting to counterweight falling equities. But the prospect of ever-tighter policy, inflation that keeps rising in spite of it, and a looming recession are crushing both stocks and bonds.

Read more: Wall Street Alarms Bell as 60/40 Set for Worse Quarter Than 2008

The surge in inverse ETF activity looks especially bearish since far more of the products use leverage than during the financial crisis. In fact, six of the 10 biggest inverse ETFs amplify their inverted returns.

The largest is the ProShares UltraPro Short QQQ (NASDAQ:SQQQ)), which delivers three times the inverse performance of the tech-heavy Nasdaq 100 Index. Its assets hit an all-time high of $4.1 billion last week. At the same time, money in its bullish leveraged counterpart, the ProShares UltraPro QQQ (NASDAQ:TQQQ), fell to the lowest in more than a year. 

“It shows the lack of conviction in the market -- investors are selling the rallies now versus buying the dips,” said Athanasios Psarofagis, an ETF analyst with Bloomberg Intelligence. “You can see the sea change in sentiment, even during March ’20, investors were buying the dip.” 

©2022 Bloomberg L.P.

Bearish Bets Are Dominating ETF Market Like 2008 All Over Again
 

Related Articles

Spirit Airlines delays vote on takeover bids
Spirit Airlines delays vote on takeover bids By Reuters - Jun 29, 2022

(Reuters) - Spirit Airlines (NYSE:SAVE) Inc said on Wednesday it was delaying a shareholder vote set for Thursday on bids for the company by JetBlue Airways (NASDAQ:JBLU) Corp...

Dow futures Little Changed Following Mixed Session
Dow futures Little Changed Following Mixed Session By Investing.com - Jun 29, 2022

By Oliver Gray  Investing.com - U.S. stock index futures were flat during overnight trading Wednesday, following a mixed session among major benchmark averages as investors remain...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other 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, don’t trash it.

  •           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. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. 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.
Comments (4)
Joe Rizzuto
Joe Rizzuto Jun 23, 2022 7:47AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
another signal bottom is near
John Lakran
John Lakran Jun 22, 2022 2:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Great for a trade but buying to hold now will end as bad as it did in 08'. Too many Bearish bets is rocket fuel for longs.
David CA
ILoveQE Jun 22, 2022 2:12PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Absolutely agree with this trend.
Jack Waters
Jack Waters Jun 22, 2022 9:56AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I agree, place to be
 
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