The S&P 500 has declined some 4% since hitting its all-time high last month, just before researchers in South Africa identified a new COVID-19 strain. The spread of the omicron variant, high inflation, and the Fed's decision to increase the pace of its tapering are giving investors pause, with the notion of a major market downturn on the minds of many. In addition, Harry Dent Jr., an American financial newsletter writer, has predicted that the biggest market crash will hit next year, with the biggest depression, with the economy not rebounding until 2024.
The National Institute's Autumn 2021 Global Economic Outlook predicted that annual U.S. inflation would rise from 1.2% in the fourth quarter of last year to 5.1% this year and moderate to 2.3% in the fourth quarter of 2022. Furthermore, CEOs across the economy agree that market volatility will remain a primary challenge even next year.
Given the rising market uncertainties, we think one could add inverse ETFs ProShares Short S&P500 (SH), ProShares Short QQQ (PSQ), ProShares Short Russell2000 (RWM), and ProShares Short Dow30 (DOG) to one's portfolio. Inverse ETFs help hedge against market downturns by moving in the opposite direction.
ProShares Short S&P500 (SH)
SH is a measure of large-cap U.S. stock market performance. It is a float-adjusted, market capitalization-weighted index of 500 U.S. operating companies. Launched and managed by ProShare Advisors LLC, the ETF is designed to deliver inverse results over a single trading session, with exposure resetting monthly.
With $1.37 billion in AUM, SH's top holding is the U.S. Dollar, which has a 52.48% weighting in the fund, followed by United States Treasury Bills 0.0% 21-APR-2022 with a 6.71% weighting, and the United States Treasury Bills 0.0% 30-DEC-2017 with a 4.79% weighting.
SH has a 0.90% expense ratio, which is lower than its 1.11% category average It has an A MSCI Rating, which is based on a score of 6.10 out of 10.
ProShares Short QQQ (PSQ)
Launched and managed by ProShare Advisors LLC, PSQ provides inverse exposure to an index that comprises the 100 largest domestic and international non-financial securities on the NASDAQ. The ETF seeks daily investment results that correspond to the inverse (-1x) of the daily performance of the NASDAQ-100 IndexÂ. PSQ invests in financial instruments that should produce daily returns consistent with the fund's investment objective
PSQ has $524 million in AUM. Its major holdings include the U.S. Dollar, which has a 51.83% weighting in the fund, followed by United States Treasury Bills 0.0% 21-APR-2022 with a 5.02% weighting, and the United States Treasury Bills 0.0% 14-DEC-2017 with a 5.02% weighting.
The ETF has seen net inflows of $11.69 million over the past month. Its 0.95% expense ratio compares to the 1.11% category average. PSQ has an A MSCI Rating, which is based on a score of 6.10 out of 10.
ProShares Short Russell2000 (RWM)
With exposure to an index that comprises small-cap U.S. equities, RWM helps investors that are looking to bet against this sector of the U.S. economy. The ETF seeks daily investment results that correspond to the inverse (-1x) of the daily performance of the Russell 2000Â Index. RWM was launched and managed by ProShare Advisors LLC.
RWM has $231.2 million in AUM. Its major holding includes the U.S. Dollar, which has a 58.80% weighting in the fund, followed by United States Treasury Bills 0.0% 11-AUG-2022 with a 7.72% weighting, and the United States Treasury Bills 0.0% 13-JAN-2022 with a 6.44% weighting.
The ETF's 0.95% expense ratio compares to the 1.11% category average. RWM has seen net inflows of $36.53 million over the past year. RWM has gained 9.2% over the past month.
ProShares Short Dow30 (DOG)
DOG offers inverse exposure to an index that consists of 30 "blue-chip" U.S. stocks, which is an attractive option for investors looking to bet against this sector of the U.S. economy. DOG has been designed to deliver inverse results over a single trading session, with exposure resetting daily. The ETF is a useful tool for investors looking to either hedge existing exposure or bet on a decline by U.S. large-cap firms.
With $262.3 million in AUM, DOG's top holding is the U.S. Dollar, which has a 56.11% weighting in the fund, followed by United States Treasury Bills 0.0% 11-AUG-2022 with a 10.70%, and the United States Treasury Bills 0.0% 08-SEP-2022 with a 9.63% weighting.
DOG has a 0.95% expense ratio, which is lower than the 1.11% category average. It has an A MSCI Rating, which is based on a score of 6.10 out of 10. The ETF has gained marginally over the past month and has seen net inflows of $28.64 million over the past three months.
SH shares were trading at $13.91 per share on Friday morning, down $0.04 (-0.29%). Year-to-date, SH has declined -22.59%, versus a 26.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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