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Wall Street had a solid run last month, with the S&P 500 and the Dow Jones logging in gains for the fourth consecutive month, rising about 5% and 2.7%, respectively. The Nasdaq Composite Index capped six consecutive months of gains, jumping 5.4% in April. The rally came on the back of big economic and profit recovery from the pandemic.
Notably, Q1 results from 30.6% of the S&P 500 members that have reported are up 46% on 5.9% higher revenues, with 84.3% beating EPS estimates and 75.2% beating revenue estimates. This is notably a better performance relative to the companies seen in the other recent periods (read: ETFs to Play the Strong Q1 Earnings Trend).
Meanwhile, the U.S. economy expanded 6.4% annually in the first quarter, indicating a fast recovery from recession. The country is expected to become the engine of the global economy this year with the strongest growth in decades. Per the IMF projection, the U.S. economy is expected to grow 6.4% annually this year.
Additionally, rapid vaccinations, progress on more vaccines and expanded stimulus continued to drive the stocks higher. Further, the latest round of economic data points to a solid rebound in consumer spending, sentiment and the jobs market.
This has resulted in huge demand for leveraged ETFs as investors seek to register big gains in a short span. Leveraged funds provide multiple exposure (2X or 3X) to the daily performance of the underlying index by employing various investment strategies such as swaps, futures contracts and other derivative instruments. Due to their compounding effect, investors can enjoy higher returns in a very short period of time, provided the trend remains positive.
Below we highlight some best-performing leveraged equity ETFs from different corners of the market that have gained in double digits last month. These funds will continue to be investors’ darlings, provided the sentiments remain bullish.
This ETF seeks to offer three times exposure to the Consumer Discretionary Select Sector Index, charging 95 bps in annual fees. It has AUM of $49.6 million and an average daily volume of 56,000 shares.
NAIL provides leveraged exposure to homebuilders and creates a three times long position in the Dow Jones U.S. Select Home Construction Index. It charges an annual fee of 95 bps and trades in a good average daily volume of about 512,000 shares. The fund has accumulated $472.8 million in its asset base (read: Housing ETFs to Shine Bright as New Home Sales Rise in March).
This ETF provides three times exposure to the performance of the Russell 1000 Financial Services Index. The fund has amassed nearly $3 billion in its asset base and charges 94 bps in annual fees. It trades in an average daily volume of nearly 2 million shares.
With AUM of $20 million, this fund offers three times exposure to the performance of the Utilities Select Sector Index. It charges investors an annual fee of 95 bps and trades in a lower average daily volume of 79,000 shares.
This fund creates 3X long position in the S&P 500 Index with 0.95% in expense ratio. It has AUM of $2.2 billion and trades in an average daily volume of nearly 6.6 million shares (read: April Ushers in Super Gains for S&P 500: ETFs in Focus).
This fund creates three times leveraged long position in the Health Care Select Sector Index while charging 95 bps in fees a year. It has $161.6 million in AUM and trades in volumes of 68,000 shares on average.
This ETF provides three times the returns of the daily performance of the Nasdaq-100 Index. It is one of the popular and liquid options in the leveraged large-cap space with AUM of $11.8 billion and an average daily volume of 40.7 million shares. TQQQ charges 95 bps in fees per year.
TPOR targets the transportation sector and seeks to deliver three times the daily performance of the Dow Jones Transportation Average Index. The product has AUM of $101.1 million and charges 95 bps in fees and expenses. It trades in lower volumes of about 131,000 shares per day.
ETRACS 2x Leveraged MSCI US Momentum Factor TR ETN (MTUL - Free Report) – Up 11.2%
This newly debuted ETN is designed to provide 2 times leveraged long exposure to the compounded quarterly performance of the MSCI USA Momentum GR USD Index and charges 95 bps in annual fees. It trades in an average daily volume of 300 shares and has accumulated $25.4 million in its asset base since its inception in late February.
This ETF offers three times leveraged exposure to the S&P Retail Select Industry Index. The product has amassed about $141.6 million in its asset base, while charging 95 bps in fees per year. It exchanges around 72,000 shares a day on average.
Bottom Line
While this strategy is highly beneficial for short-term traders, it could lead to huge losses compared to the traditional funds in fluctuating or seesawing markets. Further, the funds’ performance could vary significantly from the actual performance of their underlying index over a longer period when compared to the shorter period (such as weeks or months) due to their compounding effect (see: all the Leveraged Equity ETFs here).
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Leveraged ETFs That Gained Double Digits in April
Wall Street had a solid run last month, with the S&P 500 and the Dow Jones logging in gains for the fourth consecutive month, rising about 5% and 2.7%, respectively. The Nasdaq Composite Index capped six consecutive months of gains, jumping 5.4% in April. The rally came on the back of big economic and profit recovery from the pandemic.
Notably, Q1 results from 30.6% of the S&P 500 members that have reported are up 46% on 5.9% higher revenues, with 84.3% beating EPS estimates and 75.2% beating revenue estimates. This is notably a better performance relative to the companies seen in the other recent periods (read: ETFs to Play the Strong Q1 Earnings Trend).
Meanwhile, the U.S. economy expanded 6.4% annually in the first quarter, indicating a fast recovery from recession. The country is expected to become the engine of the global economy this year with the strongest growth in decades. Per the IMF projection, the U.S. economy is expected to grow 6.4% annually this year.
Additionally, rapid vaccinations, progress on more vaccines and expanded stimulus continued to drive the stocks higher. Further, the latest round of economic data points to a solid rebound in consumer spending, sentiment and the jobs market.
This has resulted in huge demand for leveraged ETFs as investors seek to register big gains in a short span. Leveraged funds provide multiple exposure (2X or 3X) to the daily performance of the underlying index by employing various investment strategies such as swaps, futures contracts and other derivative instruments. Due to their compounding effect, investors can enjoy higher returns in a very short period of time, provided the trend remains positive.
Below we highlight some best-performing leveraged equity ETFs from different corners of the market that have gained in double digits last month. These funds will continue to be investors’ darlings, provided the sentiments remain bullish.
Direxion Daily Consumer Discretionary Bull 3X Shares (WANT - Free Report) – Up 17.2%
This ETF seeks to offer three times exposure to the Consumer Discretionary Select Sector Index, charging 95 bps in annual fees. It has AUM of $49.6 million and an average daily volume of 56,000 shares.
Direxion Daily Homebuilders & Supplies Bull 3X Shares (NAIL - Free Report) - Up 16.4%
NAIL provides leveraged exposure to homebuilders and creates a three times long position in the Dow Jones U.S. Select Home Construction Index. It charges an annual fee of 95 bps and trades in a good average daily volume of about 512,000 shares. The fund has accumulated $472.8 million in its asset base (read: Housing ETFs to Shine Bright as New Home Sales Rise in March).
Direxion Daily Financial Bull 3x Shares (FAS - Free Report) – Up 15.1%
This ETF provides three times exposure to the performance of the Russell 1000 Financial Services Index. The fund has amassed nearly $3 billion in its asset base and charges 94 bps in annual fees. It trades in an average daily volume of nearly 2 million shares.
Direxion Daily Utilities Bull 3X Shares (UTSL - Free Report) – Up 13.1%
With AUM of $20 million, this fund offers three times exposure to the performance of the Utilities Select Sector Index. It charges investors an annual fee of 95 bps and trades in a lower average daily volume of 79,000 shares.
Direxion Daily S&P 500 Bull 3x Shares (SPXL - Free Report) – Up 12.8%
This fund creates 3X long position in the S&P 500 Index with 0.95% in expense ratio. It has AUM of $2.2 billion and trades in an average daily volume of nearly 6.6 million shares (read: April Ushers in Super Gains for S&P 500: ETFs in Focus).
Direxion Daily Healthcare Bull 3X Shares (CURE - Free Report) – Up 12.6%
This fund creates three times leveraged long position in the Health Care Select Sector Index while charging 95 bps in fees a year. It has $161.6 million in AUM and trades in volumes of 68,000 shares on average.
ProShares UltraPro QQQ (TQQQ - Free Report) – Up 12.3%
This ETF provides three times the returns of the daily performance of the Nasdaq-100 Index. It is one of the popular and liquid options in the leveraged large-cap space with AUM of $11.8 billion and an average daily volume of 40.7 million shares. TQQQ charges 95 bps in fees per year.
Direxion Daily Transportation Bull 3X Shares (TPOR - Free Report) – Up 12%
TPOR targets the transportation sector and seeks to deliver three times the daily performance of the Dow Jones Transportation Average Index. The product has AUM of $101.1 million and charges 95 bps in fees and expenses. It trades in lower volumes of about 131,000 shares per day.
ETRACS 2x Leveraged MSCI US Momentum Factor TR ETN (MTUL - Free Report) – Up 11.2%
This newly debuted ETN is designed to provide 2 times leveraged long exposure to the compounded quarterly performance of the MSCI USA Momentum GR USD Index and charges 95 bps in annual fees. It trades in an average daily volume of 300 shares and has accumulated $25.4 million in its asset base since its inception in late February.
Direxion Daily Retail Bull 3X Shares (RETL - Free Report) – Up 10.8%
This ETF offers three times leveraged exposure to the S&P Retail Select Industry Index. The product has amassed about $141.6 million in its asset base, while charging 95 bps in fees per year. It exchanges around 72,000 shares a day on average.
Bottom Line
While this strategy is highly beneficial for short-term traders, it could lead to huge losses compared to the traditional funds in fluctuating or seesawing markets. Further, the funds’ performance could vary significantly from the actual performance of their underlying index over a longer period when compared to the shorter period (such as weeks or months) due to their compounding effect (see: all the Leveraged Equity ETFs here).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>