Market Overview

Consider This Dow ETF In June

Consider This Dow ETF In June

June is almost here and if history repeats, the arrival of the sixth month of the year isn't good news for equities. Over the past 20 years, the S&P 500 has averaged June declines of 0.5 percent, making June the fourth-worst month of the year for the benchmark domestic equity gauge.

While June is also the fourth-worst month of the year for the Dow Jones Industrial Average, the blue-chip index's average June decline is worse than the S&P 500's at 0.9 percent.

What Happened

Year-to-date, the SPDR Dow Jones Industrial Average ETF (NYSE: DIA), the largest exchange traded fund tracking the Dow, is up 0.6 percent, including dividends paid.

However, that statistic belies weakness in most of the index as 20 of the Dow's 30 components are lower year-to-date. Six of those 20 stocks, including Goldman Sachs Group Inc. (NYSE: GS) and Procter & Gamble (NYSE: PG) are down at least 10 percent.

“According to the Stock Trader’s Almanac, June ranks among the worst months of the year for major indexes. The results are especially poor in midterm election years, as is 2018,” reports MarketWatch.

Why It's Important

Traders looking to profit from potential June declines by the Dow have some options to consider, including the ProShares Short Dow30 (NYSE: DOG). DOG is an inverse, though not leveraged ETF. That means if the Dow falls 1 percent on a particular day, DOG should rise by 1 percent.

“Due to the compounding of daily returns, ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period,” said the issuer.

The Dow allocates nearly 24 percent of its weight to industrial stocks while the technology and financial services sectors combine for 34.3 percent of the index's weight.

What's Next

For traders looking to get truly aggressive with their bearish Dow bets in June, there is the ProShares UltraPro Short Dow30 (NYSE: SDOW). That ETF is designed to deliver triple the daily inverse performance of the blue-chip index.

Triple-leveraged ETFs, bullish or bearish, should be used as short-term instruments and not held over lengthy time frames.

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