Consumer sentiment hit record lows, with rising concerns regarding persistently high inflation. With inflation hitting a new 40-year high at 8.6% in May, an aggressive rate hike of up to 75 bps is very likely in the near term, and the Fed’s 2% inflation target seems to be a distant dream now. Such grim anticipation and lingering supply-demand inequalities have pushed the market into bear territory, as evident from the S&P 500’s 21.6% year-to-date decline.

While the World Bank has warned of a recession and slashed its global growth forecast, Joseph Brusuelas, the chief economist at RSM, said, “Right now, it looks like any talk of a recession is a 2023 story. My sense is the economy is going to slow, but only really back to its long-term trend growth rate of 1.8%.”

Given this backdrop, we think ETFs that perform well in a bear market, such as Direxion Daily S&P 500 High Beta Bear 3X Shares (HIBS), ProShares UltraShort S&P500 (SDS), Direxion Daily Semiconductor Bear 3X Shares (SOXS), and Direxion Daily Small Cap Bear 3X Shares (TZA), could be ideal investments now.

Direxion Daily S&P 500 High Beta Bear 3X Shares (HIBS)

Launched by Direxion Investments, HIBS invests in public equity markets of the United States. The ETF invests in swap agreements, futures contracts, short positions, or other financial instruments and selects 100 securities from the S&P 500 with the highest sensitivity to market movements (beta value) over the past 12 months, depending on price fluctuations.

With $50.70 million in assets under management (AUM), HIBS’ top holdings include Goldman Sachs FS Treasury Intms Instl with a 42.94% weighting, followed by Goldman Finl Sq Trsry Inst 506 at 24.58%, S&P 500 High Beta Index Swap at 19.57% and Dreyfus Government Secs Cash Mgmt Admin at 6.66%. Over the past month, the ETF’s net inflows were $5.31 million. In addition, its 1.01% expense ratio compares favorably to the 1.00% category average. HIBS has gained 36.1% over the past six months.

HIBS has an A grade for Peer in our POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

HIBS is ranked #8 of 101 ETFs in the Leveraged Equities ETFs group. Click here to see all the HIBS ratings.

ProShares UltraShort S&P500 (SDS)

SDS measures large-cap U.S. stock market performance. It is a powerful tool for investors with a bearish short-term outlook, and the ETF’s leverage resets daily, making it an exception to the buy-and-hold strategy.

S&P 500 Index Swap Societe Generale has a 24.59% weighting in the fund as its top holding, followed by S&P 500 Index Swap Goldman Sachs International at 17.12%, S&P 500 Index Swap Citibank Na at 13.03%, and S&P 500 Index Swap Bnp Paribas at 12.61%. SDS has $792.30 million in AUM. It has 16 holdings in total. Its net inflows came in at $12.83 million over the past month. Its 0.91% expense ratio is lower than the 1.00% category average. The fund has gained 39.1% over the past six months.

SDS’ strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which translates to a Strong Buy in our proprietary rating system.

It has an A grade for Trade and Buy & Hold and a B for Peer. SDS is ranked #3 of 50 ETFs in the A-rated Inverse Equities ETFs group. To see all of SDS’ ratings, click here.

Direxion Daily Semiconductor Bear 3X Shares (SOXS)

SOXS is a rules-based, modified float-adjusted market capitalization-weighted index that tracks the performance of the thirty largest U.S. listed semiconductor companies. It offers 3x daily short leverage to the PHLX Semiconductor Index.

The fund has $324.40 million in AUM. Its top holdings include Goldman Sachs FS Treasury Intms Instl with a 58.39% weighting, Phila Semiconductor Index Swap at 26.11%, Dreyfus Government Secs Cash Mgmt Admin with 15.62%, and Goldman Sachs FS Government Instl with 8.55%. Its net inflows came in at $57.28 million over the past month. Its 1.01% expense ratio compares favorably to the 1.00% category average. Over the past six months, the fund has gained 48.6%.

SOXS is ranked #35 of 50 ETFs in the Equities ETFs group. Click here to see all SOXS’ ratings.

Direxion Daily Small Cap Bear 3X Shares (TZA)

TZA measures the performance of approximately 2,000 small-capitalization companies in the Russell 3000 based on their market capitalization. 

Dreyfus Government Secs Cash Mgmt Admin has an 82.52% weighting in the fund as its top holding, followed by Goldman Sachs FS Treasury Intms Instl at 36.20%, and Russell 2000 Index Small Swap at 19.07%. TZA has $443.50 million in AUM. In addition, its net inflows were $134.22 million over the past month. The fund’s 1.00% expense ratio is at par with the 1.00% category average. The fund has gained 55.9% over the past six months.

TZA’s strong fundamentals are reflected in its POWR ratings. It has an overall rating of B. It also has a B grade for Trade and Buy & Hold. Click here to get TZA’s rating for Peer. It is ranked #28 of 50 ETFs in the Inverse Equities ETFs group.

HIBS shares were trading at $12.08 per share on Wednesday afternoon, down $0.97 (-7.43%). Year-to-date, HIBS has gained 46.25%, versus a -19.85% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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