ROM: De-Risking Means De-Leveraging In Today's Environment

2025-03-05 22:01:00 ET

Summary

• The market has shifted from consistent gains to increased volatility, signaling a potentially turbulent 2025, driven by factors like tariff news and economic uncertainty.
• Investors should proactively "de-risk" their portfolios by reducing leverage and high-beta investments, rather than reacting with "panic de-risking" during market downturns.
• The ProShares Ultra Technology ETF, a 2x leveraged technology fund, amplifies both gains and losses, making it particularly risky in a volatile market.
• Due to stretched valuations in the technology sector and increased market uncertainty, the article recommends selling ROM and transitioning to a less volatile fund like XLK or increasing cash holdings.

Thesis

Have you noticed how suddenly the markets don't just go up every day? It should be clear by now that 2025 will look nothing like 2024, and that the daily roller-coaster of tariff news might not stop any time soon. Volatility has perked its way back in the stock market, with the VIX index now above 20 again, and most equity indices in the red for the year as we are writing this article:

• S&P 500: -1.5%
• Nasdaq: -3.0%
• Russell 2000: -6.5%

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