CEOs, investors, and analysts are sounding recessionary alarms for the U.S. economy. Experts are primarily concerned about the Federal Reserve’s aggressive rate hikes to bring inflation to its 2% target.

Indicators such as the inversion of the U.S. Treasury yields, the decline in pending home sales, and the plunge in global freight rates are also increasingly pointing toward a recession.

The ProShares Short QQQ (PSQ - Get Rating) offers inverse exposure to the Nasdaq-100 index. The fund seeks daily investment results corresponding to the inverse of the daily performance of the underlying index. The fund seeks to profit from a market decline and hence, provides a hedge against downside risk.

Over the past year, the ETF has gained 28.7%. It has gained 27.7% year-to-date and 11.3% over the past three months to close its last trading session at $13.83.

Here are the factors that could influence PSQ’s performance in the near term:

Fund Stats

PSQ has $1.58 billion in net assets. The fund’s current NAV is $13.83. It has an expense ratio of 0.95%, which is lower than the category average of 1.02%. Over the past year, the fund’s net inflow was $598.12 million. It has had a net inflow of $171.59 million over the past six months. It has a five-year beta of negative 0.98.

As of November 18, PSQ’s top holdings include CASH MGMT BILL with 3.49% weight and treasury bills. It holds short positions like in the NASDAQ 100 INDEX SWAP BARCLAYS CAPITAL CITIBANK NA with a negative 15.24% weight and NASDAQ 100 INDEX SWAP SOCIETE GENERALE with a negative 14.20% weight.

The Nasdaq-100 index has a 48.97% weight in the information technology sector, 17.08% in the consumer discretionary sector, and 15.83% in the communication services sector. The index’s top holdings include Apple Inc. (AAPL), with a 13.30% weight, and Microsoft Corporation (MSFT), with a 10.40% weight.

POWR Ratings Reflect Promising Prospects

PSQ’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

PSQ has an A grade for Peer and a B for Trade and Buy & Hold. It is ranked #2 in the 50-ETF Inverse Equities ETFs group.

Click here to see the POWR Ratings for PSQ.

View all the top ETFs in the Inverse Equities ETFs group here.

Bottom Line

The current volatile market backdrop makes inverse investment options popular. Moreover, the fund’s substantial net inflow over the past year looks promising. Therefore, PSQ might be a solid investment amid the uncertain economic and market conditions.

How Does ProShares Short QQQ (PSQ) Stack up Against Its Peers?

While PSQ has an overall POWR Rating of B, one might consider looking at its industry peers, ProShares Short S&P500 (SH - Get Rating) and Direxion Daily S&P 500 Bear 1X Shares (SPDN - Get Rating), which also have an overall B (Buy) rating.

PSQ shares rose $0.12 (+0.87%) in premarket trading Monday. Year-to-date, PSQ has gained 27.70%, versus a -15.65% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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