Tech stocks fell Tuesday. Chip stocks fell harder. The headline blames leveraged ETFs for the volatility. That's like blaming the speedometer for the car crash.
Leveraged ETFs amplify moves. A stock drops 2%, the 3x leveraged ETF drops 6%. Revolutionary stuff. Someone got paid to write this article explaining multiplication to adults who opened brokerage accounts.
The real story here is simpler. Retail traders discovered they could buy SOXL and turn a boring semiconductor selloff into a life-altering margin call. They did exactly that. Now financial media pretends the instrument caused the volatility instead of the morons using it.
Chipmakers sold off. Nobody knows why. Could be earnings. Could be China. Could be supply chains or demand forecasts or tariffs or literally anything because chip stocks move on vibes and analyst price targets pulled from a hat. The leveraged ETFs just made sure everyone felt it three times harder.
This is presented as news. "Volatility may continue because the thing designed to create volatility continues to exist." Tomorrow they'll run a piece about how gasoline makes fires burn hotter.
The roller coaster metaphor is perfect though. Retail traders wait in line for an hour, pay too much, strap themselves in voluntarily, then scream the whole way down like they were ambushed. The leveraged ETF is just the front car. You still chose to get on.
Tech dragged global markets lower. Chips led the way. Leveraged products made it worse. This will continue happening until either the products disappear or the people buying them run out of money.
The second one happens faster.
Photo by Brett Wharton on Unsplash
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