Are Inverse ETFs Better Bets Till Election Day?

Sanghamitra Saha
·3-min read

While the start of the week has been rocky due to rising COVID-19 cases globally, the real blow came on yesterday as Wall Street collapsed. The S&P 500 and the 30-stock Dow Jones hit their lowest levels since late September, with the latter losing more than 943 points in a day.

Among the key indexes, the S&P 500, the Dow Jones, the Nasdaq and the Russell 2000 lost about 3.5%, 3.4%, 3.7% and 3.0%, respectively, on Oct 28. Even the safe-haven metal gold was not spared as it shed about 1.8% on the day.

Why the Crash?

With winter approaching, COVID-19 cases are on the rise. Parts of Europe announced additional lockdowns and U.S. cities such as Chicago, New York and New Jersey launched a new round of restrictive measures to fight the spread of the coronavirus.

COVID-19 infections are spreading across the United States at the fastest clip since the start of the pandemic, according to the latest NBC News figures. The 71,000 new cases per day that the United States averaged over the past week was the maximum in any seven-day period this year.

Across the pond, German Chancellor Angela Merkel announced new lockdown measures on Wednesday, shutting restaurants, bars, recreation centers, pools, and cinemas for one month, and restraining travel and large events.

French President Emmanuel Macron announced the second national lockdown for at least the whole of November. The moves would follow similar restrictions executed over the past few weeks in Italy and Spain.

Apart from this, the United States is prepping for presidential election on Nov 3.Wall Street's fear gauge spiked to its highest level since Jul 15 due to election uncertainty. There are talks that a winner might not be declared the night of Nov 3 due to a postponement to count the huge volume of mail-in ballots.

Former Vice President Joe Biden has managed an 11-point lead over President Trump one week before the election, but the CNBC All-America Economic Survey shows the race could tighten, per CNBC. Swing states can be the deciding factor. One should not forget that Trump won in 2016 despite lagging the then-Democratic candidate Hilary Clinton in many polls.

Should You Buy Inverse ETFs?

While markets may try to recoup losses on Oct 29 after the steep selling on Oct 28, uncertainty related to coronavirus and election will rule global markets. So, it could be a wise decision to short markets at least till the election result outcome. Following are the ETFs that could be used to short markets.

S&P 500 – ProShares Short S&P 500 SH

Nasdaq 100 – ProShares Short QQQ PSQ

Dow Jones – ProShares Short Dow 30 DOG

Russell 2000 –   ProShares Short Russell 2000 RWM

China – Direxion Daily CSI 300 China A Share Bear 1X Shares CHAD

Emerging Markets – Short MSCI Emerging Markets ProShares EUM

EAFE – Short MSCI EAFE ProShares EFZ

Midcaps – ProShares Short Midcap 400 MYY

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Proshares Short MSCI Emerging Markets (EUM): ETF Research Reports
 
Proshares Short Dow30 (DOG): ETF Research Reports
 
ProShares Short SP500 (SH): ETF Research Reports
 
Proshares Short QQQ (PSQ): ETF Research Reports
 
ProShares Short MSCI EAFE (EFZ): ETF Research Reports
 
Proshares Short Russell2000 (RWM): ETF Research Reports
 
ProShares Short MidCap400 (MYY): ETF Research Reports
 
Direxion Daily CSI 300 China A Share Bear 1X Shares (CHAD): ETF Research Reports
 
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