S&P 500 flirts with bear market territory and these ETFs are there for the ride

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Despite gains early in Friday’s trading, the S&P 500 (SP500) remains close to bear market territory for 2022. This has put exchange traded funds tied to the key U.S. equity index in focus, such as iShares Core S&P 500 ETF (NYSEARCA:IVV), Vanguard S&P 500 ETF (NYSEARCA:VOO) and SPDR S&P 500 Trust ETF (NYSEARCA:SPY).

These ETFs find themselves down 17% in 2022 and reached a year-to-date decline as steep as 19.2% on Thursday — extremely close to defining a bear market.

Typically, a bear market is defined as a 20% drop over a certain period of time. On a year-to-date basis, marking from the S&P 500’s closing level on the last day of 2021, a 20% fall would take the index to about 3,813.

Meanwhile, the S&P 500 hit a record intraday high of 4,818.62 on Jan. 4. A 20% drop from that point would take the index to about 3,855. On Thursday, the S&P hit an intraday low of 3,858.87 — within a few points of reaching a 20% slide from its peak.

However an investor chooses to measure it, the S&P has come dangerously close to bear-market territory. With a sharp rebound in Friday’s early trading, the prospect of breaking below that barrier in the immediate term has diminished. Still, with recent market volatility and with serious headwinds remaining, the possibility lingers that another market slide could sit on the horizon.

After all, the S&P 500 is still on pace to close lower for the sixth straight week in a row. The index is down 12.5% over that six-week period.

As risk and uncertainty levels remain elevated, investors may want to shift their attention towards ETFs that aim to offer investors protection against bear market losses with inverse S&P 500 funds. See examples below:

The ProShares Short S&P 500 (SH) is +16.7% YTD. Moreover, its 2X and 3X leveraged brother and sister funds are up even greater. The ProShares UltraShort S&P 500 (SDS) and ProShares UltraPro Short S&P 500 (SPXU) are up 33.1% and 49.6% in 2022.

Moreover, see below a five-year weekly chart of the S&P 500 as it approaches bear market territory. Additionally, see more analysis on IVV, VOO, SPY, SPXU, SDS, and SH.