Traders shift leveraged ETF tactics to net S&P 500 will fall

Investors are increasingly shifting from bets that US stocks will rise, flipping their cash into exchange-traded funds that profit when markets tumble.

About $218 million has flowed away from bullish leveraged ETFs tracking the S&P 500 Index this coming year through Monday, even while the benchmark rebounds from its worst month in almost 10 years. Meanwhile, funds that capitalise on inverse movements while in the benchmark have attracted almost triple that amount in inflows, using them course with regards to best month of asset gathering since July 2016, as outlined by data composed by Bloomberg.

The $2.3 billion ProShares Short S&P 500 ETF absorbed $380 million a fortnight ago, its biggest weekly inflow since 2010. And investors have obtain triple-leveraged Direxion Daily S&P 500 Bear 3X Shares virtually every day this holiday season. S&P 500 futures rose 0.2% at the time of 5:38 p.m. in Hong Kong on Wednesday.

After coming within a hair associated with a bear market, the S&P 500 has rebounded 11%. But sentiment remains jittery as global economic data always worry investors, while uncertainties across the US-China trade relationship continue.

“We a really tough December there could be that alteration of price momentum which retail investors can be answering,” said Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs Group Inc. It’s one indication of sentiment “if men and women are taking bets with a highly levered instrument, maybe it’s a warrant, a solution or possibly a levered ETF.”

Anyone who bought into leveraged bullish ETFs last month felt some pain, as losses magnified within a volatile market. With 2018 getting a difficult year, strategists have pared their forward 12-month forecasts for the S&P 500. They still see big gains coming, having a mean prediction of two,906 for your benchmark after the entire year an 11% advance from Tuesday’s close.

Still, the reasons behind the moves while in the ETFs may not be as clear because they seem. By way of example, traders may be using them to offset existing positions as opposed to for straight directional bets, reported by Mark Tinker, head of Framlington Equities Asia at AXA Investment Managers in Hong Kong.

“I suspect that inverse ETF is actually a strategy for hedging a portfolio,” Tinker said. “For individuals it is probably mostly of the methods diversify and hedge.”

? 2019 Bloomberg L.P

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