The announcement of new tariffs set to take effect on February 1 has triggered a risk-off sentiment across US equity markets, with the S&P 500 experiencing a decline in breadth. This has particularly impacted sectors like energy, which are heavily dependent on global trade. The heightened concerns over potential earnings declines due to increased costs have led investors to adopt a more cautious approach. In this environment, value stocks are underperforming growth stocks, which are perceived to have better long-term prospects despite short-term volatility. Additionally, small-cap stocks are lagging behind their large-cap counterparts, as they are more vulnerable to cost pressures from tariffs. The market's fear premium has risen, as indicated by an increase in the VIX and implied volatility, reflecting a greater demand for downside protection.
The MAX S&P 500 4X Leveraged ETN (SPYU) saw a significant decline, dropping 2.45% to $50.15 at 16:20 on Friday, January 31.