February was the month of heightened volatility as rising concerns over faster-than-expected rates hike continued to shake the complacency off the stock market. This is especially true as the CBOE Volatility Index (VIX), also known as the fear gauge, traded in a wide range of high of more than 50 to a low of 12.50. The Dow Jones Industrial Average also saw wild swings of 1,600 and 1,200 in the first week of February — the two biggest intraday ranges in its history.
While the equity market suffered the worst decline in many years on some occasion during the month, commodities like gold and oil also continued to show their volatility. U.S. crude futures dropped from a three-year high of more than $66 per barrel to a low of under $60 per barrel during the month. For gold, while rising yields diminished the attractiveness of the yellow metal since it does not pay interest like fixed-income assets, a drive to hedge against inflation pushed investors to gold.
The fixed income space was also out of investors' favor, piling up heavy losses with rising yields. The two-year yields climbed to the highest level in nearly 10 years at 2.274% and 10-year yields jumped to the highest level in more than four years to above 2.9%.
Given the downside sentiments and higher volatility, inverse or leveraged inverse ETFs gained immense popularity last month as investors embraced these products for big gains in a short span. In fact, many products provided outsized gains (over 20%) last month, though these involve a great deal of risk when compared to traditional products. These products either create an inverse long/short position or leveraged inverse long/short position in the underlying index through the use of swaps, options, future contracts and other financial instruments.
Below we have highlighted five such ETFs that generated handsome returns last month and should continue to do so at least for the near term if the sentiments remain volatile.
Direxion Daily Gold Miners Index Bear 3x Shares (DUST – Free Report) – Up 29.4%
