Three ETFs That Thrived in Magnificent Seven's Slide

Advisors have a wide range of ways to counter any trend.

Reviewed by: Staff
Edited by: Ron Day

When I went looking for ETFs that not only weathered the 10% “correction” that befell the Roundhill Magnificent Seven ETF (MAGS) during the last six trading days through Friday, or the one-day “correction” of 10% in market leader Nvidia Corp. on Friday alone, I saw something I’ve seen for years.

Specifically, when the broad stock market goes low, several different types of ETFs go high. Higher in price, that is. And if last week’s decline is not the end of it for now, that seems a clear signal for advisors to respond to, by upping their skills in the area of playing defense in their client portfolios.

Namely, that ETFs of many shapes and sizes can be used to try to make money for clients when your competition is making excuses for why they didn't embrace this set of more than 3,000 flexible pieces (ETFs) that can play a role in portfolios. (I'm no fan of terms like bull market, bear market or correction, since most people use the terms to define fleeting situations. Since I'm in the minority, I’ll use the terms to make a point.) 

In addition to being potential counter-trend pieces of a broader portfolio, all four of these ETFs are what I’d call “undercover,” which I define as having less than $200 million in assets. In other words, they haven't been widely discovered.

These ETFs Profited Last Week, and May Go Higher

The two obvious names on this short list are, well, ETFs that short. One is the tiny $15 million ProShares Short MSCI Emerging Markets (EUM), up more than 2% on the week and up about 6% since its recent bottom back on April 9. China is a significant part of what this fund shorts, and emerging markets stocks have generally been a place to avoid when markets get ugly around the globe.

Another ignored single inverse ETF that had at least a moment last week was the ProShares Short Real Estate ETF (REK), a $20 million fund that has been around since 2010. That was after the last real estate crisis, but if another is brewing, this ETF might find some demand. 

It gained nearly 4% last week, upping its 2024 gain to 14%. Yet apparently, few notice, or if they did notice, they didn’t care. This is where advisors can deep deeper and identify ETFs that either help portfolios as a hedge, or at least show clients that their investing toolbox is robust.  

And the $184 million United States Copper Index Fund (CPER) gained 5.2% last week and has surged more than 18% the past three months. That’s simillar to what Nvidia owners could have said a week ago, as that stock was up big for the year before fading more than 20% in about six weeks. 

This year is reminding us that, as they say on Wall Street, trees don't grow to the sky, and stocks and ETFs that rally furiously are always subject to a sharp reversal in fortune.

This is a time for taking stock, so to speak. It is a wide world of opportunity out there, and if there were ever a time for advisors to double up on their research efforts to find potential gems in less obvious places, this would be the time.

Rob Isbitts was an investment advisor for 27 years before selling his practice to focus on ETF research and education. He is based in Weston, Florida. Contact him at  [email protected] and follow him on LinkedIn.