Education Series: Single-Stock ETPs

Would the Bear Strike Again?

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Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

Building permits in the U.S. tumbled 11.2% from a month earlier to a seasonally adjusted annual rate of 1.342 million in November 2022, well below market expectations of 1.485 million. Building permits which are a proxy for future construction, have been falling as soaring prices and rising mortgage rates have hit demand and activity, and marked the lowest level since June 2020.

Existing home sales in the U.S. slumped to a two and a half year low, plunging 7.7% to a seasonally adjusted annual rate of 4.09 million in November 2022, much worse than market expectations of a 5.4% drop.

This is the tenth consecutive month of falls in home sales, which is the lowest level since May 2020, as the Fed’s aggressive interest rate hiking cycle is having a huge impact on housing. Despite demand being down, supply remains tight, keeping home prices elevated, albeit the pace of increases is slowing.

The U.S. Bureau of Economic Analysis released on the Thursday GDP growth rate data, showing the U.S. economy grew at an annualized 3.2% on quarter in Q3 2022, better than 2.9% in the second estimate, and rebounding from two straight quarters of contraction.

Initial claims for state unemployment benefits rose by 2,000 to 216,000 in the week ending 17th of December, below market expectations of 220,000 and extending signals of a stubbornly tight labor market, adding to hawkish projections for the Federal Reserve along with the upward revision to the US GDP.

Labor market resilience is keeping the U.S. central bank on its aggressive policy tightening campaign, with the Fed last week projecting at least an additional 75 basis points of increases in borrowing costs by the end of 2023. Companies are likely to stop hiring before starting layoffs as employers have been struggling to find labor during the COVID-19 pandemic.

Overall, equity markets suffered its worst year since the Global Financial Crisis, crushed under the boot of rising interest rates, supply chain disruptions and ongoing global energy crisis. These joined forces generated the greatest inflation shock over the past four decades, forcing the central bank to aggressively hike rates.

Source: Tradingview

The current short-term strength of the market is likely to be a temporary relief rally and the overall weakness in 2022 could extend into the first quarter of next year, as equity valuations in the U.S. remain high by historical standards and economic data points to a likely upcoming recession spelling risks for corporate earnings.

Higher interest rates are harmful for riskier assets like equities because they can compress valuation multiples apart from inflict damage on the overall economy. Some of the valuation adjustment has already played out, with the S&P 500 earnings multiple falling sharply this year. However, the earnings impact is not fully priced in and could be a big driver in 2023.

While the lagging indicators are showing that the U.S. economy is still fine, the forward-looking indicators are flushing red. The housing market is starting to crack, new business orders are declining, and the yield curve is deeply inverted. “Interest rates” and “inflation” were in most headlines in 2022, but “recession” is likely to take the throne in 2023.

The strong rebound from the October lows has already reversed direction and it looks like Santa won’t be coming to town this year. We have repeatedly warned in previous articles that further weakness is ahead, and our baseline scenario for a likely new low likely being formed in the first half of 2023 remains unchanged. In our view levels to 3,400 in the coming months appear feasible.

Active traders looking for magnified exposure to U.S. equity indices may consider our 3x Long US 500 and -3x Short US 500 ETPs.

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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Market Insights

Sandeep Rao


Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

Violeta Todorova

Senior Research

Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

Julian Manoilov

Senior Analyst

Julian joined Leverage Shares in 2018 as part of the company’s premier expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

Oktay Kavrak


Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined LS from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

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