Inverse ETFs To Play The Decline In Tech

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The high-growth technology sector has been seeing turbulence since the start of the week.The weakness is being largely observed as investors are exiting major tech players and growth picks amid intensifying fears of increasing inflation and rising interest rates, per a CNBC article. The tech-heavy Nasdaq Composite index fell 2.7% on May 12, seeing a weekly decline of more than 5%. Going by Yahoo Finance data, technology stocks witnessed their worst day since March 18.

Weakness was observed in major tech players as shares of Microsoft MSFT, Netflix NFLX, Amazon AMZN and Apple AAPL declined more than 2% on May 12. Moreover, Tesla TSLA lost more than 4% while Alphabet GOOGL was down more than 3% on the same day.

Spooking investors more, the latest data highlighted inflation levels rising at the fastest speed since 2008 in April. Notably, the Consumer Price Index rose 4.2% year over year in comparison with the Dow Jones estimate of a 3.6% rise, per a CNBC article. Going on, the five-year breakeven inflation rate — which measures expectations of inflation five years out — reached its highest since April 2011 on May 10 while the 10-year breakeven inflation rate — a measure of expectations of inflation in 10 years’ time — rose to its highest since March 2013.

Investors are worried that rising inflation may hurt corporate margins and profits. They are also fearing that the consistent rise in inflation may put pressure on the Federal Reserve to tighten monetary policy, per a CNBC article.

It is worth noting here what Brian Levitt, global market strategist for Invesco, told Yahoo Finance. He said, “We have an accelerating growth environment with the prospects for some inflation. And for investors, when they think about inflation, they tend to move away from tech stocks, because they think of tech stocks as longer-duration assets in which you're not going to be paid well into the future, and they'd instead rather own parts of the market that are more highly correlated with nominal GDP. "

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