WAll Street was down last week on rising inflationary pressures, rising interest rate concerns and geopolitical tensions. The S&P 500, the Dow Jones, the Nasdaq Composite and the Russell 2000 lost 2.8%, 1.9%, 3.8% and 3.2% respectively.
As for rates, the benchmark Treasury yield started the week at 2.85%, hit a high of 2.93% and then closed the week at 2.90%. Fed Chair Jerome Powell said the central bank was determined to raise interest rates “quickly” to tame inflation.
Investors took the explanation as a 50 basis point rate hike in May as inflation is at a 40-year high. “It is absolutely necessary to restore price stability,” Powell added in a CNBC article (read: A 50bp rate hike in May? Sector ETFs to make profits).
Also, the recently released FOMC March meeting minutes highlighted the central bank’s plans to control inflation levels through larger rate hikes. It also outlined the method and extent of the reduction in assets worth around $9 trillion.
Remarkably, Federal Reserve officials have decided to trim their balance sheet by about $95 billion a month. More specifically, the Fed plans to reduce $60 billion in Treasuries and $35 billion in mortgage-backed securities gradually over a three-month period, beginning in May (according to a CNBC article).
With that in mind, below we highlight a few inverse/leveraged ETF ranges that made gains over the past week. Most of the winners were the result of the rising interest rate trend.
ETFs in focus
Micro Sectors Gold Miner -3X ETN GDXD – up 32.86%
With rising interest rates being negative for gold bullion investments (since gold is a non-interest bearing asset) and mining companies often acting as leveraged trades in the underlying metal, inverse gold mining ETF GDXD rallied.
S&P Biotech Bear 3X Direction LABD – up 28.7%
The rising interest rate trend is negative for growth sectors such as tech and biotech. No wonder this inverse leveraged biotech fund was a winner last week.
Microsectors Fang+ -3X ETN FNGD – up 28.3%
Inverse Leveraged FANG ETF was a winner last week due to two factors. One of them is the plunge in Netflix (NFLX) stock due to the surprise loss of subscribers last quarter. And the second is the Fed’s faster rate hike stocks. Tech stocks typically do better in a low interest rate environment.
Dow Jones Internet Bear 3X Direction WEBS – up 26.9%
Inversely leveraged internet stocks also gained last week on rising interest rate trends. Netflix’s stock slump has also done its share of damage to the internet industry.
Etfmg Prime Junior Silver Miners -2X ETF SINV – increase of 26.4%
The plunge in silver mining stocks was also due to rising interest rate trends. Rising interest rates will lead to a higher greenback, which is inversely related to metal prices.
Want important ETF information delivered straight to your inbox?
Zacks’ free fund newsletter provides you with the latest weekly news, analysis and top-performing ETFs.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.