Worst Weekly Collapse Since 2020: Inverse ETFs Soar

U.S. markets suffered a major blow last week as renewed trade tensions and inflation concerns rattled investors. The S&P 500declined 8.2%, recording its worst weekly performance since 2020. The Dow Jones Industrial Averagenosedived over 7% and officially entered correction territory. The Nasdaq Composite sank 8.6%, closing in bear market territory.

Due to the market crash, some inverse exchange-traded funds (ETFs) offered 25%+ returns last week. These ETFs include ,Direxion Daily Semiconductor Bear 3x Shares ,SOXS (up 40.1%), ,MAX Airlines -3X Inverse Leveraged ETNs ,JETD (up 36%), ,MicroSectors Travel -3x Inverse Leveraged ETN ,FLYD (up 33.8%), ,Direxion Daily S&P 500 High Beta Bear 3X Shares ,HIBS (up 30.4%), ,MicroSectors U.S. Big Banks -3 Inverse Leveraged ETN ,BNKD (up 28.2%) and ,Direxion Daily Dow Jones Internet Bear 3X Shares ,WEBS (up 25%).

China Retaliates With New Tariffs

The selloff worsened following news that China will impose a 34% tariff on all U.S. products starting April 10, parallelling the additional 34% tariff that the Trump administration had announced on April 2.

President Donald Trump introduced and enacted a two-step tariff strategy on April 2, 2025 marking the implementation of his "Liberation Day" plans. A baseline tariff of 10% was imposed on imports from various countries starting April 5.

Additional duties will be levied on select nations deemed the worst offenders, taking effect on April 9. Trump stated that these extra rates were determined based on both tariff and non-tariff barriers, which have long been criticized.

The move heightened fears of a prolonged global trade war, with investors fearing trade retaliations rather than negotiations (read: Inside Trump Tariffs and Their Impact on Sector ETFs).

Investors Seek Safety in Treasury Bonds

Amid the market chaos, investors sought refuge in government bonds. The 10-year Treasury yielddropped to 3.9%, approaching its lowest level since October, reflecting growing concern over economic uncertainty.

Should You Buy Inverse ETFs?

While markets will attempt to recoup losses, uncertainty related to the trade war will dominate the global markets in the near term. So, it could be a wise decision to short markets at least in the near term to earn some quick profits. Following are the ETFs that could be used to short markets.

S&P 500 – ProShares Short S&P 500 ,SH

Nasdaq 100 – ProShares Short QQQ ,PSQ

Dow Jones – ProShares Short Dow 30 ,DOG

Russell 2000 – ProShares Short Russell 2000 ,RWM

Emerging Markets – Short MSCI Emerging Markets ProShares ,EUM

EAFE – Short MSCI EAFE ProShares ,EFZ

Midcaps – ProShares Short Midcap 400 ,MYY

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research