How To Profit From Wall Street Crash With ETFs
Zacks Investment Research | Nov 21, 2018 01:00AM ET
Probably nothing went right on Nov 20 with tech stocks tanking, Are We Headed Toward Bear Market? ETFs to Save Your Portfolio ).
Rising rate concerns in the United States and no concrete signs of abatement in U.S.-Sino trade tensions and its impact on global growth are the main culprits. While both the factors dealt a blow to the overall market, high-flying tech names — known for lofty valuations — specifically took a hit.
Notably, some of FAANGs have come up with steepest monthly decline since November 2008.
Coming to the oil patch, United States Oil (NYSE:USO) Brent in Bear Market: 4 Country ETFs to be Cautious About ).
Notably, the International Monetary Fund (IMF) lowered its global growth forecasts on concerns between the United States and its trading partners. The IMF now expects the global economy to expand 3.7% this year and next year — down 0.2 percentage points from the previous forecast.
Bitcoin prices have also been falling sharply with Bitcoin USD (BTC-USD) plummeting about 69% this year. Most recently, it slid to $4,279, marking the lowest in the last 13 month s. In late-2017, the cryptocurrency had scaled to as high as $19,870.62.
Market Impact
The result of these negative developments is a bloodbath in the markets. The three big U.S. ETFs SPDR S&P 500 ETF (NYSE:SPY) QQQ (down 1.8%) lost massively. The S&P 500 (down about 1.2%) and the Dow Jones (down 3.3%) are now in the red for the year while Nasdaq Composite is up just 0.1%.
How to Profit?
Given the upheaval, investors could easily tap the opportunity by going short on global equities, at least for the near term. Below we highlight a few.
Dow Jones
Investors looking to play against the tumbling Dow Jones may tap ProShares Short Dow 30 SDOW (up about 6.6%).
S&P 500
Investors can go against the S&P 500 with ProShares Short S&P500 ETF SH (up 1.9% on Nov 20) and Direxion Daily S&P 500 Bear 1X ETF (LON:SPD) (up 1.9%).
Nasdaq
ProShares Short QQQ (AX:PSQ) (up 1.8% on Nov 20), ProShares UltraShort QQQ SQQQ (up 5.3%) are good to play against the Nasdaq.
Technology
Technology stocks have taken the biggest blow. So, inverse tech ETFs ProShares UltraShort Technology TECS (up 6.3%) jumped more than 3.1% on Nov 20.
FANG
Given the mounting pressure on the FANG space, it is no wonder investors are looking to bet against it. MicroSectors FANG+ Index Inverse ETN Leveraged FAANG ETFs: What Investors Need to Know ).
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Small-Cap
One can also short small-cap U.S. equities with ProShares Short Russell2000 RWM (up about 1.9% on Nov 20).
EAFE
ProShares Short MSCI EAFE EFZ (up 1.7% on Nov 20) could be a good way to short stocks from the EAFE region and avoid the spillover effect of the Wall Street sell-off.
Emerging Markets
If anybody wants to short emerging markets, ProShares Short MSCI Emerging Markets ETFs to Benefit & Lose From a Strengthening Dollar ).
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