ETFs & Mutual Funds
JPMorgan, Nomura Warn Leveraged ETFs Amplifying Stock Gyrations
- Such funds may be exerting a bigger influence on broad market
- Rebalancing flows have grown bigger as volatility returns
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After weeks of stomach-churning volatility, Wall Street pundits are blaming a burgeoning leveraged investment strategy for exacerbating stock-market moves, particularly right before the end of the trading day.
Funds that use derivatives to offer juiced-up or inverse returns of individual companies and indexes sold about $15 billion of stocks on Sept. 3 — when the Nasdaq 100 plunged 3% — according to JPMorgan Chase & Co. That was the cohort’s biggest selling wave from rebalancing since the onset of the pandemic.