The S&P 500 experienced its longest losing streak of 2025, dropping for five consecutive trading days as of Thursday. It is also the first time this year that the index has endured such a drop, according to Dow Jones Market Data.
The S&P 500 declined 1.5% over the past five sessions, pressured by selling in big tech names as investors rotated away from the tech sector on AI bubble fears and overvaluation concerns. This downturn was exacerbated by disappointing Target TGT and Walmart WMT earnings, renewed tariff impacts and fading hopes of a Fed rate cut in September (read: Value Outshines Growth: 5 ETF Winners Over the Past Week).
Ahead of Powell's speech, CME Group's FedWatch Tool is currently indicating a 73.6% chance that the Fed will lower rates by a quarter point next month, down from 92.1% a week ago.
The market sell-off has fueled a rally in inverse single-stock ETFs. Inverse single-stock ETFs are designed to deliver the opposite daily return of a specific company’s stock by using derivatives. For example, if the underlying stock drops 1% in a day, the inverse ETF targeting that stock would ideally increase about 1%.
Some ETFs offer leveraged exposure, such as -2x or -3x, which attempt to deliver two or three times the inverse of the stock’s daily move. This allows investors to gain inverse exposure to a particular stock without having to sell the stock directly.
We have highlighted five inverse single-stock ETFs that have gained in double digits over the past week (see: all the Single Stock ETFs here).
Defiance Daily Target 2X Short PLTR ETF (PLTZ) – Up 30.6%
Defiance Daily Target 2X Short PLTR ETF offers two times the opposite of the daily percentage change in the share price of Palantir Technologies PLTR. The stock has fallen 17% since its peak on Aug. 12 and shed about $73 billion in market cap over just six sessions, marking its worst streak this year.
Defiance Daily Target 2X Short MSTR ETF (SMST) – Up 25.1%
Defiance Daily Target 2X Short MSTR ETF seeks daily inverse leveraged investment results of 200% the daily percentage change in the share price of Strategy MSTR. MSTR shares slumped 10.5% over the past week to the lowest level since April 21.
Defiance Daily Target 2X Short IONQ ETF (IONZ) – Up 19.4%
Defiance Daily Target 2X Short IONQ ETF seeks inverse daily investment results of two times the daily percentage change in the share price of IonQ Inc. IONQ. The stock is down 10.4% over the past week.
GraniteShares 2x Short COIN Daily ETF (CONI) – Up 16%
GraniteShares 2x Short COIN Daily ETF offers two times the inverse daily performance of the Coinbase Global COIN. Coinbase is down 7.6% over the last five trading days.
Defiance Daily Target 2X Short SMCI ETF (SMCZ) – Up 15.7%
Defiance Daily Target 2X Short SMCI ETF seeks daily inverse investment results of two times the performance of Super Micro Computer SMCI. Shares of SMCI slumped 7% in the same time frame.
Risks of Investing in Inverse Single-Stock ETFs
While inverse single-stock ETFs surge amid the sell-off, they come with significant risks due to their lack of diversification and exposure to the volatility of a single stock. They are typically more suited for experienced investors who understand and are willing to accept these risks. Here are some of the downsides of these ETFs:
Daily Reset and Compounding Risks: The performance of inverse ETFs could vary significantly from the actual performance of their underlying stock over a longer period when compared to a shorter period (such as weeks or months). These funds run the risk of huge losses in fluctuating or seesawing markets.
Risk of Significant Losses: As the ETF is tied to a single stock, a surprise rally in the company’s shares can quickly erode gains and generate steep losses for inverse ETF holders.
High Costs: Liquidity can be a big problem, as it can make the products more expensive than they appear. Expense ratios for inverse single-stock ETFs are often significantly higher than those of traditional ETFs. Over time, these fees can eat into returns, particularly if the ETF is held longer than intended (read: AI Fatigue Hits Tech Biggies: Inverse ETFs in Focus).
Not Suitable for All Investors: These ETFs work best for short-term hedging or speculation and are suitable only for short-term traders, as these are rebalanced on a daily basis.
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Target Corporation (TGT): Free Stock Analysis Report
Walmart Inc. (WMT): Free Stock Analysis Report
Super Micro Computer, Inc. (SMCI): Free Stock Analysis Report
Strategy Inc (MSTR): Free Stock Analysis Report
Palantir Technologies Inc. (PLTR): Free Stock Analysis Report
Coinbase Global, Inc. (COIN): Free Stock Analysis Report
IonQ, Inc. (IONQ): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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