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Bet on the Top Leveraged ETFs of the Longest-Ever Bull Market
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As the U.S. bull market becomes the longest on record since World War II by avoiding 20% or more decline, investors are now more confident on the health of the American economy. The bull run is currently 3,453 days or nine and-a-half years old, surpassing the previous record of 3,452 days set during Sep 11, 1990 to Mar 24, 2000. The S&P 500 has gained about 324% since a low of 676.53 hit on Mar 9, 2009 and is poised to trend higher (read: S&P 500 on Track for Longest Bull Run: How to Trade With ETFs).
The latest rally can be attributed to easing political and geopolitical tension, strong corporate earnings and improving economic growth. In particular, the U.S. economy has been witnessing the fastest pace of growth in nearly four years, thanks to historic tax cuts, infrastructure investment, higher government spending, deregulation, rising wages, record unemployment, rising consumer confidence and higher spending. A rising rate scenario also signals strengthening economy, which is spurring growth in the stock market.
Per Trump, “the United States is on track to hit the highest annual growth rate in over 13 years.” The wave of mergers and acquisitions also added to the strength. Additionally, the global economy continues to expand at a steady pace despite turmoil in some emerging markets like Turkey and Venezuela.
However, a host of challenges like Trump’s protectionist stance, inflation threats, rising bond yields, faster-than-expected rate hikes, and slowdown in many parts of the developed and developing economies might disrupt the momentum in the months ahead (read: Keep an Eye on These ETF Areas as US & China Plan Trade Meet).
Though volatility will continue, we believe that the bull market has higher chances of scaling higher. As a result, investors should bet on the best performing leveraged ETFs of the longest-ever bull market. Leveraged funds provide multiple exposure (i.e 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. These have piled up abnormal returns during the nine-year period.
This ETF targets the technology sector with three times (3x) leveraged exposure to the Technology Select Sector Index. It has amassed about $744.5 million in its asset base and charges 95 bps in fees per year. Volume is good as it exchanges around 219,000 shares a day on average.
This product offers twice (2x) the return of the daily performance of the Nasdaq 100 Index, charging 0.95% in annual fees. The fund has AUM of $2 billion and trades in solid average daily volume of 1.7 million shares.
This fund creates a triple leveraged long position in the S&P 500 index while charging 95 bps in fees a year. It has $925.4 million in AUM and trades in volume of 4.5 million shares on average (read: Play These Leveraged ETFs as Market Rally Continues).
This product provides two times exposure to the daily performance of the Dow Jones U.S. Consumer Services Index. It has been able to manage $30.9 million in its asset base and trades in a paltry volume of around 3,000 shares per day on average. Expense ratio is 0.95%.
Direxion Daily Small Cap Bull 3X Shares (TNA - Free Report) – Up 2269%
This ETF provides three times the return of the daily performance of the Russell 2000 Index and exchanges around 2.8 million shares in hand on average per day. The fund has AUM of $800.6 million and charges 95 bps in fees and expenses
Bottom Line
As a caveat, investors should note that these products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures (see: all Leveraged Equity ETFs here).
Still, for ETF investors who are bullish on the equity for the near term, any of these products can be an interesting choice for those with high-risk tolerance, and a belief that the “trend is the friend” in this corner of the investing world.
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Bet on the Top Leveraged ETFs of the Longest-Ever Bull Market
As the U.S. bull market becomes the longest on record since World War II by avoiding 20% or more decline, investors are now more confident on the health of the American economy. The bull run is currently 3,453 days or nine and-a-half years old, surpassing the previous record of 3,452 days set during Sep 11, 1990 to Mar 24, 2000. The S&P 500 has gained about 324% since a low of 676.53 hit on Mar 9, 2009 and is poised to trend higher (read: S&P 500 on Track for Longest Bull Run: How to Trade With ETFs).
The latest rally can be attributed to easing political and geopolitical tension, strong corporate earnings and improving economic growth. In particular, the U.S. economy has been witnessing the fastest pace of growth in nearly four years, thanks to historic tax cuts, infrastructure investment, higher government spending, deregulation, rising wages, record unemployment, rising consumer confidence and higher spending. A rising rate scenario also signals strengthening economy, which is spurring growth in the stock market.
Per Trump, “the United States is on track to hit the highest annual growth rate in over 13 years.” The wave of mergers and acquisitions also added to the strength. Additionally, the global economy continues to expand at a steady pace despite turmoil in some emerging markets like Turkey and Venezuela.
However, a host of challenges like Trump’s protectionist stance, inflation threats, rising bond yields, faster-than-expected rate hikes, and slowdown in many parts of the developed and developing economies might disrupt the momentum in the months ahead (read: Keep an Eye on These ETF Areas as US & China Plan Trade Meet).
Though volatility will continue, we believe that the bull market has higher chances of scaling higher. As a result, investors should bet on the best performing leveraged ETFs of the longest-ever bull market. Leveraged funds provide multiple exposure (i.e 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. These have piled up abnormal returns during the nine-year period.
Below, we have highlighted five ETFs that could see more gains if the market continues to trend upward (read: Leveraged ETFs: How Are They Built and What's Hot Now?).
Direxion Daily Technology Bull 3x Shares (TECL - Free Report) – Up 5383%
This ETF targets the technology sector with three times (3x) leveraged exposure to the Technology Select Sector Index. It has amassed about $744.5 million in its asset base and charges 95 bps in fees per year. Volume is good as it exchanges around 219,000 shares a day on average.
ProShares Ultra QQQ (QLD - Free Report) – Up 3002%
This product offers twice (2x) the return of the daily performance of the Nasdaq 100 Index, charging 0.95% in annual fees. The fund has AUM of $2 billion and trades in solid average daily volume of 1.7 million shares.
Direxion Daily S&P 500 Bull 3x Shares (SPXL - Free Report) – Up 2948%
This fund creates a triple leveraged long position in the S&P 500 index while charging 95 bps in fees a year. It has $925.4 million in AUM and trades in volume of 4.5 million shares on average (read: Play These Leveraged ETFs as Market Rally Continues).
ProShares Ultra Consumer Services (UCC - Free Report) – 2532%
This product provides two times exposure to the daily performance of the Dow Jones U.S. Consumer Services Index. It has been able to manage $30.9 million in its asset base and trades in a paltry volume of around 3,000 shares per day on average. Expense ratio is 0.95%.
Direxion Daily Small Cap Bull 3X Shares (TNA - Free Report) – Up 2269%
This ETF provides three times the return of the daily performance of the Russell 2000 Index and exchanges around 2.8 million shares in hand on average per day. The fund has AUM of $800.6 million and charges 95 bps in fees and expenses
Bottom Line
As a caveat, investors should note that these products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures (see: all Leveraged Equity ETFs here).
Still, for ETF investors who are bullish on the equity for the near term, any of these products can be an interesting choice for those with high-risk tolerance, and a belief that the “trend is the friend” in this corner of the investing world.
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 >>