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September Lull Lingers: 5 Best Inverse/Leveraged ETFs of Last Week

Wall Street replicated the week before and ended on a negative note last week too. This strengthened the worth of the adage that September is historically the worst month of the year for stocks. The S&P 500, the Dow Jones and the Nasdaq Composite lost about 0.6%, 0.07% and 0.5%, respectively. The S&P 500 is on its way toward its first monthly decline since January. The Russell 2000 only added 0.42% last week.

Consumer sentiment missed estimates in early September and hovered near a decade-low as concerns over inflation lingered. Notably, September has an ill reputation for the stock market. According to moneychimp.com, a consensus carried out from 1950 to 2020 revealed that September ended up offering positive returns in 32 years and negative returns in 39 years, with an average return of negative 0.62%, which is worse than any other month.

However, last week was not extremely downbeat on every ground as the oil sector surged and the retail sales bounced back. U.S. retail sales gained 0.7% sequentially in August 2021, following an upwardly revised 1.8% drop-off in July and breezing past market expectations of a 0.8% decline, as demand for goods remained strong despite the surge in cases of the Delta variant of Covid-19. Back-to-school shopping and child tax credit payments from the government are deemed to be the drivers, per Reuters (read: August Retail Sales Shine: ETFs & Stocks to Win).

Oil prices also staged a rally courtesy of ahost of factors. Most recently, an industry data showed a larger-than-expected drawdown in U.S. crude stockpiles. Also, expectations of higher demand thanks to growing vaccine distribution along with a still-dovish Fed boosted hopes of higher oil consumption. Brent hit its highest levels since late July and WTI since early August, per CNBC(read: Sector ETFs to Benefit/Lose as Oil Crosses $70).

“The impact of Hurricane Ida was a lot greater than many anticipated and production in the Gulf of Mexico region might struggle to return until Tropical Storm Nicholas is done punishing the region with torrential rain,” said Edward Moya, senior analyst at OANDA, as quoted on CNBC.

There was another big event last week. President Biden always had plans for tax hikes. In line with that plan, House Democrats drew a host of tax hikes on corporations and wealthy people to finance the costs associated with the social safety net and climate policy that could touch as much as $3.5 trillion (read: Tax Hike in the Cards? ETFs in Focus).

The plan demands top corporate and individual tax rates of 26.5% and 39.6%, respectively, according to a summary released by the tax-writing Ways and Means Committee, as quoted on CNBC. The proposal includes a 3% surcharge on individual income above $5 million and a capital gains tax of 25%.

Against this backdrop, below we highlight a few inverse/leveraged ETFs that were the winning ones last week.

ETFs in Focus

Microsectors U.S. Big Oil Index 3X ETN NRGU – Up 12.84%

As oil prices rallied, leveraged energy ETFs gained last week. The fund follows the equal-dollar weighted Solactive MicroSectors U.S. Big Oil Index that provides exposure to the 10 largest U.S. energy and oil companies.

FTSE China Bear 3X Direxion (YANG) – Up 12.58%

Chinese equities have been under pressure for quite some time.  The China government’s crackdown on various sectors, especially technology, has weighed on it. Last week witnessed China’s property market bubble. Investors received a news that China Evergrande Group, the largest property company in the world in 2018, is set to miss interest payments on bank loans due on Sep 20. The fund follows the FTSE China 50 Index, which consists of the 50 largest and most liquid public Chinese companies currently trading on the Hong Kong Stock Exchange.

Ultrashort Silver ETF ZSL – Up 12.30%

The U.S. dollar rose last week. This probably weighed on the precious metals. The ProShares UltraShort Silver seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the daily performance the Bloomberg Silver Subindex.

Ultrashort MSCI Brazil Capped ETF BZQ – Up 7.18%

Brazil's real currency and stocks dropped sharply last week. Global growth worries amid a renewed virus threat recently weighed on the risk sentiment. The ProShares UltraShort MSCI Brazil Capped seeks daily investment results, before fees and expenses, that correspond to two times the inverse of the daily performance of the MSCI Brazil 25/50 Index.

Microsectors Gold Miners -3X ETN GDXD – Up 6.41%

The MicroSectors Gold Miners -3X Inverse Leveraged ETNs is linked to a three times inverse leveraged participation in the performance of the S-Network MicroSectors Gold Miners Index. Gold prices have also been a victim of Fed’s taper talks and the resultant rise in the greenback.


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ProShares UltraShort Silver (ZSL): ETF Research Reports
 
ProShares UltraShort MSCI Brazil Capped (BZQ): ETF Research Reports
 
MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU): ETF Research Reports
 
MicroSectors Gold Miners 3X Inverse Leveraged ETNs (GDXD): ETF Research Reports
 
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