It is broadly true that over long periods, the stock market tends to rise. At its core, the market represents a collection of businesses that, over time, aim to grow earnings per share by selling more products and services, expanding into new markets and improving efficiency.
As companies succeed, their share prices rise, and in a market cap-weighted index, the winners naturally take up a larger share of the portfolio. Share buybacks can further boost returns by increasing each investor’s ownership stake, while dividends return excess profits when reinvestment opportunities are limited. Taken together, these forces create a long-term upward bias.
[Sign up for stock news with our Invested newsletter.]
Over shorter periods, however, markets can behave very differently. Entire sectors or countries can fall out of favor, and individual companies can see sharp declines due to weak earnings, accounting issues or competition. During broad market sell-offs, even fundamentally strong companies can be pulled lower. This dynamic has led to the saying that “correlations go to one” during a crisis.
While many long-term investors choose to stay invested through these periods, others look for ways to benefit from declining prices. Traditional approaches include short selling and buying put options.
Short selling involves borrowing shares, selling them and hoping to repurchase them later at a lower price, but it exposes investors to potentially unlimited losses and margin calls if the trade moves against them. Put options offer defined risk, but cost upfront premiums and time decay, meaning their value erodes as expiration approaches.
A third approach is through inverse exchange-traded funds (ETFs). These alternative funds are designed to deliver the opposite of a benchmark’s return, typically on a daily basis, using derivatives such as swaps with counterparties. Many target -1x, -2x or -3x the daily performance of an index, although newer products from providers such as Tradr ETFs may use longer reset periods such as monthly targets.
“Inverse ETFs are built for short-term tactical trading and require close daily monitoring because, as well as boosting gains, losses are amplified,” explains Mo Sparks, chief product officer at Direxion. “That’s why they’re best suited for experienced traders.”
It is important to match the ETF’s reset period with your intended holding period. Daily inverse ETFs are designed for short-term trading, and holding them over longer periods can lead to unpredictable results due to compounding, especially for leveraged variants in volatile markets.
“Direxion’s inverse ETFs are tactical instruments that should be used with clear time frames and expertise,” Sparks explains. “They can be efficient, precision tools for traders with a defined thesis.”
Here are 10 inverse ETFs that have the potential to gain in a bear market:
| ETF | Expense ratio |
| Direxion Daily AI and Big Data Bear 2x ETF (ticker: AIBD) | 1.05% |
| Direxion Daily Dow Jones Internet Bear 3x ETF (WEBS) | 1.07% |
| Direxion Magnificent Seven Bear 1x ETF (QQQD) | 0.50% |
| Direxion Daily 20+ Year Treasury Bear 3x ETF (TMV) | 0.97% |
| Direxion Daily Energy Bear 2x ETF (ERY) | 0.99% |
| ProShares UltraPro Short QQQ ETF (SQQQ) | 0.95% |
| ProShares UltraPro Short Russell 2000 ETF (SRTY) | 0.95% |
| ProShares UltraShort Gold ETF (GLL) | 0.95% |
| ProShares UltraShort Silver ETF (ZSL) | 0.95% |
| ProShares Short Bitcoin ETF (BITI) | 1.01% |
Direxion Daily AI and Big Data Bear 2x ETF (AIBD)
Some investors have begun drawing parallels between the current AI boom and the dot-com bubble, citing concerns such as circular financing, heavy debt-funded data center buildouts and still-developing revenue models tied to AI adoption. Skepticism has created interest in bearish positioning.
AIBD offers a way to express that view, seeking to deliver -2x the daily return of the Solactive U.S. AI and Big Data Index. This benchmark includes companies like Amazon.com Inc. (AMZN), Apple Inc. (AAPL) and Nvidia Corp. (NVDA). The ETF carries a 2.65% gross expense ratio, though investors only pay a 1.05% expense ratio after waivers are applied.
Direxion Daily Dow Jones Internet Bear 3x ETF (WEBS)
The flip side of the AI boom is the risk of disruption. Concerns have emerged that artificial intelligence could pressure business models across internet platforms, a theme that briefly gained traction following a widely circulated Substack article from Citrini Research highlighting potential vulnerabilities.
WEBS provides inverse exposure to this segment, delivering -3x the daily return of the Dow Jones Internet Composite Index. Some of its underlying holdings in application software and interactive media face risks from AI-driven competition and shifting user behavior. The ETF charges a 1.07% expense ratio.
Direxion Magnificent Seven Bear 1x ETF (QQQD)
Older investors may remember the “Nifty Fifty,” not the Indian index, but a group of dominant blue-chip stocks that once commanded premium valuations before eventually falling out of favor. Today, a similar narrative has formed around the Magnificent Seven, which have driven much of the market’s gains.
Investors looking to bet on a reversal in market leadership can consider QQQD. This ETF seeks to deliver the inverse of the daily performance of an equal-weighted basket of Apple, Alphabet Inc. (GOOG), Microsoft Corp. (MSFT), Amazon, Nvidia, Tesla Inc. (TSLA) and Meta Platforms Inc. (META).
Direxion Daily 20+ Year Treasury Bear 3x ETF (TMV)
The recent surge in energy prices stemming from the U.S. and Israel conflict with Iran has renewed concerns about inflation. If inflation proves persistent, long-term Treasury bonds could come under pressure, as rising yields typically lead to falling bond prices, especially for bonds with longer durations.
Investors looking to position against this segment can use TMV, which seeks to deliver -3x the daily return of the ICE U.S. Treasury 20+ Year Bond Index. In 2022, when interest rates rose aggressively, TMV was among the top-performing ETFs due to its inverse exposure to long-duration bonds.
Direxion Daily Energy Bear 2x ETF (ERY)
The run-up in oil prices has pushed the energy industry to the top of the performance tables year to date. According to financial data provider Finviz, the U.S. energy sector has gained 31.5%, supported by revenue windfalls from higher crude prices and upbeat guidance from management.
However, energy is a notoriously cyclical sector, and such momentum may not persist. Investors betting on a reversion to the mean can consider ERY. The inverse ETFs seeks to deliver -2x the daily return of the Energy Select Sector Index, a benchmark of large-cap S&P 500 energy companies.
ProShares UltraPro Short QQQ ETF (SQQQ)
SQQQ is one of the most widely traded inverse ETFs, both in terms of assets under management and the popularity of its underlying benchmark. The Nasdaq-100 is a frequent target for traders due to its high liquidity, the large number of ETFs tracking it and the deep options market tied to the index.
SQQQ seeks to deliver -3x the daily return of the Nasdaq-100. Like other leveraged inverse ETFs, this exposure is achieved through derivatives such as total return swaps, with major U.S. and international banks acting as counterparties. The ETF charges a gross expense ratio of 0.99%, but investors pay a net expense ratio of 0.95%.
ProShares UltraPro Short Russell 2000 ETF (SRTY)
In market downturns, cyclical small-cap stocks often experience greater downside volatility than large-cap blue chips. Many smaller companies have less stable earnings, weaker balance sheets and greater sensitivity to economic slowdowns, which can amplify losses during periods of stress.
Investors seeking higher torque in bearish positioning may consider SRTY, which aims to deliver -3x the daily return of the Russell 2000 index. The index itself includes many companies with limited or no profitability, making it particularly sensitive to tightening financial conditions.
ProShares UltraShort Gold ETF (GLL)
Inverse ETFs are not limited to equities. They can also provide exposure to commodities, allowing investors to express bearish views beyond stocks. For those looking to bet against gold prices, GLL offers a straightforward option. The ETF seeks to deliver -2x the daily return of the Bloomberg Gold Subindex.
It is important to note that GLL does not track spot gold prices directly. Instead, it uses futures contracts and index swaps. However, while performance may not perfectly match live gold prices, the correlation is generally close in practice for short holding periods. GLL charges a 0.95% expense ratio.
ProShares UltraShort Silver ETF (ZSL)
Commodity prices can be highly volatile, driven by both supply and demand shocks. While gold tends to be somewhat stabilized by its role in central bank reserves, silver is more exposed to industrial demand, which can amplify price swings. This can be especially acute during periods of inflation.
ZSL allows investors to take a bearish position on silver, delivering -2x the daily return of the Bloomberg Silver Subindex. Like GLL, it relies on futures and index swaps rather than spot pricing, so returns may not match exactly but tend to track closely over a short period. ZSL also charges a 0.95% expense ratio.
ProShares Short Bitcoin ETF (BITI)
Shorting Bitcoin directly often requires using a cryptocurrency exchange, which can add complexity and counterparty risk. BITI provides a more accessible alternative through a traditional brokerage account. Shares of BITI trade with good liquidity thanks to a 0.04% 30-day median bid-ask spread.
The ETF seeks to deliver the inverse of the daily performance of the Bloomberg Bitcoin Index using futures contracts. As a result, overall performance may differ from inverse spot Bitcoin prices, but generally moves reliably in the opposite direction on a daily basis. BITI carries a 1.01% expense ratio.
More from U.S. News
7 Best Dividend ETFs to Buy Now
6 of the Best AI ETFs to Buy for 2026
10 Inverse ETFs That Gain in a Bear Market originally appeared on usnews.com
Update 03/26/26: This story was previously published at an earlier date and has been updated with new information.
