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(Bloomberg) — A booming corner of the $6.2 trillion ETF market is sending ominous signals about the path ahead for US stocks.

Trading in inverse ETFs — vehicles that win when the market loses — is eclipsing activity in bullish leveraged products by the widest margin since the financial crisis, according to data from Bloomberg Intelligence. 

That looks like a fresh sign of disintegrating sentiment as the most aggressive Federal Reserve policy since 1994 fuels a bear market with few precedents. Leveraged long funds are almost always more popular than their bearish counterparts as traders seek to supercharge any market gains. 

Now that dip-buying urge is evaporating, being replaced by demand for hedges amid this year’s broad stock losses.

“It makes sense to see inverse ETFs becoming more popular and receiving inflows,” said Peter Chatwell, head of global macro strategies trading at Mizuho International Plc. “For real money investors, downside protection of a portfolio is difficult to come by, particularly in a rising yield environment where government bonds don’t work well as a hedge.”

Usually, fixed income would outperform in a slowing economy, acting to counterweight falling equities. But the prospect of ever-tighter policy, inflation that keeps rising in spite of it, and a looming recession are crushing both stocks and bonds.

Read more: Wall Street Alarms Bell as 60/40 Set for Worse Quarter Than 2008

The surge in inverse ETF activity looks especially bearish since far more of the products use leverage than during the financial crisis. In fact, six of the 10 biggest inverse ETFs amplify their inverted returns.

The largest is the ProShares UltraPro Short QQQ (ticker SQQQ), which delivers three times the inverse performance of the tech-heavy Nasdaq 100 Index. Its assets hit an all-time high of $4.1 billion last week. At the same time, money in its bullish leveraged counterpart, the ProShares UltraPro QQQ (TQQQ), fell to the lowest in more than a year. 

“It shows the lack of conviction in the market — investors are selling the rallies now versus buying the dips,” said Athanasios Psarofagis, an ETF analyst with Bloomberg Intelligence. “You can see the sea change in sentiment, even during March ’20, investors were buying the dip.” 

–With assistance from Anthony Rayar.

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