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Over the past week, the S&P 500 lost 1.9% in value, despite a 6.4% week-on-week rise in the previous week. As last Monday’s article predicted, this rise was predominantly limited to a single day’s rally (on Friday) and was likely due to deeply oversold positions. There were likely some opportunistic bets made that overall sentiment would continue to be bullish. This didn’t pan out and there is some expectation that the market will remain bearish in the current week, with some rallying on Friday.
Overall, in the first half of this year, the S&P 500’s performance was the worst since 1970 – which it barely squeaked past. Since 1957, in the years when the S&P 500 had a negative first half, the benchmark had a negative second half about 50% of the time.
What might tilt this trend to be more likely for the rest of the year would be the outlook on the broader U.S. economy. Expectations of U.S. first-quarter GDP growth rate facing a 1.5% contraction were unmet; the actual number worked out to be 1.6%. The Atlanta Fed’s GDPNow gauge estimates the second-quarter running at negative 2.1%. In technical terms, this confirms that the U.S. is already in a recession.
Real estate was one strong haven for investors in this year as concerns over inflation grew stronger. In the U.S., the ratio between the average new home price and disposable income were at all-time highs last week.
Over here in Europe, Eurozone inflation rates surged to 8.6% in June, which is up from 8.1% in May, which surpassed expectations of 8.5%. This indicates an increasing squeeze on households across the Eurozone, with France, Italy and Spain reporting new all-time high highs this past week. Unsurprisingly, this is strengthening calls for an aggressive rate hike by the European Central Bank.
The yield on 10-year US Treasury bonds rose 0.08 percentage points to 2.92% while the yield of the 2-year bonds – considered more sensitive – climbed 0.12 percentage points to 2.66%. This is in expectation that central banks would attempt to combat inflation more aggressively. As yields increase, prices fall. Given that the U.S. and Eurozone have a heavy presence in government bond markets worldwide, the total government bond market is projected to have the worst returns over the past 150 years.
In the U.S. equity market, “tech” – a long-standing mainstay of investor preferences over the past couple of decades – has seen the worst performance over the past six months. Only healthcare and energy stocks show a net outperformance.
In the middle of last month, coverage of the GPU-centric NVIDIA and the CPU-centric AMD had mentioned how a fadeout in overall growth outlook make these overvalued stocks particularly vulnerable. In the first half of the year, both had lost nearly half their value. In the past week alone, NVIDIA plummeted by 13.9% while AMD was down by 14.5%
Over in the oil market, the overall trend seen through most of the past month (which was also covered) continued in the past week: US Oil slid by 1.5% – a rate commensurate with the decline in the S&P 500. This also confirms the broad outlook on energy consumption: with inflation rising, many households in the Western Hemisphere will be reducing their energy consumption somehow. Given the fall in energy prices and the market – along with the increasing expectation of rate hikes – there is very strong argument that the recessionary phase of the inflation/recession cycle has already, in fact, begun.
In Conclusion
For European investors, many brokers offer a host of leveraged inverse products underpinning most high-conviction U.S. stocks, broad indices and commodities that are currently manifesting a very strong use case with the potential realize short-term gains over the course of a week or even longer. With adversity comes opportunity and this is certainly true for the pragmatic and disciplined investor.
Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.
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The ETP securities are intended for sophisticated investors who (i) are able to monitor their investment in the ETP securities on a frequent basis in line with the recommended holding period; (ii) understand the risk of compounded returns and the increased risk of investment in leveraged products; (iii) can afford to risk losing their investment; and (iv) and have a very short investment horizon in line with the recommended holding period. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer. This material is not intended to be relied upon as a forecast, research or investment advice and is not a recommendation, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy. Any decision to invest should be based on the information contained in the relevant base prospectus after seeking independent investment, tax and legal advice.
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The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
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This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.
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Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).
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Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
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Terms and Conditions
Notice
If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.
If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.
Risk Warnings
The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.
Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.
This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.
United States Visitors
The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.
Persons accessing this website in the European Economic Area
Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Exclusion of Liability
Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
Leverage Investment
Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.
Cookies
Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.
This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2.
By clicking you agree to the Terms and Conditions displayed.