One look at the stock quotes on your computer screen reveals a not so subtle theme: Red all over the place.
The generally accepted definition of a bear market is a 20 percent decline over at least a two-month period. And by that measure, the U.S. stock market is within striking distance.
Exchange-traded funds (ETFs) tracking the Dow Jones Industrial Average (DIA) and the S&P 500 (SPY) are in the vicinity of bear market territory. So far this year, DIA has declined by 15.3 percent and SPY is off by 14.3 percent.
The decline in stocks hasn’t been bad news for everyone.
Spiraling stocks have fueled the performance of bear-market ETFs, which are designed to increase in value when the securities they track fall. These types of funds are also referred to as “short” or “inverse” funds.
The ProShares Short Dow 30 (DOG) is up 15.8 percent through July 10 and the ProShares Short S&P (SH) has jumped 15 percent since the beginning of the year. (ProShares is affiliated with ProFunds Group, which also offers mutual funds that have similar short strategies.)
RydexShares is another lineup of inverse performing ETFs. The Rydex Inverse 2x Russell 2000 ETF (RRZ) which moves in the opposite direction of small-cap stocks, has climbed 20.8 percent.