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The start of 2023 has been solid for the U.S. stock market. After a strong comeback in the early weeks of the year, Wall Street has been caught in a tug of war between the bulls and bears lately.
This is especially true as moderating inflation and renewed confidence in the U.S. economy are driving bulls while the latest hawkish comments from Fed officials are making bears ride slowly. As such, the Dow Jones logged in the third consecutive weekly loss while both the S&P 500 and Nasdaq Composite Index incurred back-to-back weekly losses (read: 5 Top-Ranked ETFs Beating the Market at Midway Q1).
With the latest slide, the Dow Jones Industrial Average and the S&P 500 Index are up 2.4% and 6.2%, respectively, while the tech-heavy Nasdaq Composite Index gained 12.6%. This has resulted in huge demand for leveraged ETFs as investors sought to register big gains in a short span. We highlight a bunch of the best-performing leveraged equity ETFs from different corners of the market that gained more than 50% at the halfway first quarter.
These include MicroSectors Travel 3x Leveraged ETN (FLYU - Free Report) , BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) , Direxion Daily Retail Bull 3X Shares (RETL - Free Report) , Daily S&P 500 High Beta Bull 3X Shares (HIBL - Free Report) and Direxion Daily Consumer Discretionary Bull 3X Shares (WANT - Free Report) . These funds will continue to be investors’ darlings, at least in the near term, provided the sentiments remain bullish.
The latest data on inflation and retail sales have led to worries that the Fed will keep rates higher longer than expected. Additionally, some Fed officials see a strong case for a bigger increase and warned that additional hikes in borrowing costs are essential to lower inflation to desired levels. As such, yields on the 10-year and 2-year U.S. Treasury bonds hit levels not seen since November, weighing on equities.
Further, the earnings picture so far appears to be weak and points to a recession. Earnings from the S&P 500 companies that have reported results so far are down 5.8% from the same period last year on 5.6% higher revenues, with 70.8% beating both EPS and revenue estimates. The growth pace for both earnings and revenues represents a notable deceleration from the trend seen in other recent periods.
In particular, the tech sector, which has enjoyed strong growth and was the major contributor to the broad market rally to start the year, has lost momentum due to weak earnings. The sector earnings beat ratio is the lowest in the preceding 20 quarters, while the revenue surprise is also toward the lower end of the 5-year range (read: Will the Nasdaq ETF Lose Shine on Weak Tech Earnings?).
MicroSectors Travel 3x Leveraged ETN offers three times (3X or 300%) exposure to the performance of the MerQube MicroSectors U.S. Travel Index. It has accumulated $7.1 million in its asset base since its debut in late June and charges 95 bps in annual fees.
MicroSectors Travel 3x Leveraged ETN trades in a paltry volume of 2,000 shares per day on average.
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) – Up 78.4%
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN seeks to offer three times leveraged exposure to the NYSE FANG Index, charging 95 bps in annual fees (read: 5 Leveraged ETFs That Took Flight in Strong January).
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN has accumulated $1.2 billion in its asset base and trades in an average daily volume of 2.6 million shares.
Direxion Daily Retail Bull 3X Shares offers three times leveraged exposure to the S&P Retail Select Industry Index.
Direxion Daily Retail Bull 3X Shares has amassed about $63.9 million in its asset base, while charging 95 bps in fees per year. It exchanges around 443,000 shares a day on average.
Daily S&P 500 High Beta Bull 3X Shares (HIBL - Free Report) – Up 54.9%
Daily S&P 500 High Beta Bull 3X Shares offers three times exposure to the performance of the S&P 500 High Beta Index. The index selects 100 securities to include in the index from the S&P 500 Index that have the highest sensitivity to market movements, or “beta,” over the past 12 months.
Daily S&P 500 High Beta Bull 3X Shares has garnered $86.7 million in its asset base and trades in an average daily volume of 204,000 shares. The fund charges 95 bps in fees per year from its investors.
Direxion Daily Consumer Discretionary Bull 3X Shares offers leveraged exposure play in the consumer discretionary sector. It provides three times exposure to the Consumer Discretionary Select Sector Index, charging 95 bps in annual fees (read: 4 ETFs to Tap on Solid Q4 GDP Numbers).
Direxion Daily Consumer Discretionary Bull 3X Shares has AUM of $31.4 million and an average daily volume of 82,000 shares.
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 the Leveraged Equity ETFs here).
Still, for ETF investors bullish on U.S. stocks for the near term, either of the above products can be an interesting choice. Clearly, a near-term long could be intriguing for those with high-risk tolerance and a belief that the trend is a friend in this corner of the investing world.
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5 Leveraged ETFs Up More Than 50% at Halfway Q1
The start of 2023 has been solid for the U.S. stock market. After a strong comeback in the early weeks of the year, Wall Street has been caught in a tug of war between the bulls and bears lately.
This is especially true as moderating inflation and renewed confidence in the U.S. economy are driving bulls while the latest hawkish comments from Fed officials are making bears ride slowly. As such, the Dow Jones logged in the third consecutive weekly loss while both the S&P 500 and Nasdaq Composite Index incurred back-to-back weekly losses (read: 5 Top-Ranked ETFs Beating the Market at Midway Q1).
With the latest slide, the Dow Jones Industrial Average and the S&P 500 Index are up 2.4% and 6.2%, respectively, while the tech-heavy Nasdaq Composite Index gained 12.6%. This has resulted in huge demand for leveraged ETFs as investors sought to register big gains in a short span. We highlight a bunch of the best-performing leveraged equity ETFs from different corners of the market that gained more than 50% at the halfway first quarter.
These include MicroSectors Travel 3x Leveraged ETN (FLYU - Free Report) , BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) , Direxion Daily Retail Bull 3X Shares (RETL - Free Report) , Daily S&P 500 High Beta Bull 3X Shares (HIBL - Free Report) and Direxion Daily Consumer Discretionary Bull 3X Shares (WANT - Free Report) . These funds will continue to be investors’ darlings, at least in the near term, provided the sentiments remain bullish.
The latest data on inflation and retail sales have led to worries that the Fed will keep rates higher longer than expected. Additionally, some Fed officials see a strong case for a bigger increase and warned that additional hikes in borrowing costs are essential to lower inflation to desired levels. As such, yields on the 10-year and 2-year U.S. Treasury bonds hit levels not seen since November, weighing on equities.
Further, the earnings picture so far appears to be weak and points to a recession. Earnings from the S&P 500 companies that have reported results so far are down 5.8% from the same period last year on 5.6% higher revenues, with 70.8% beating both EPS and revenue estimates. The growth pace for both earnings and revenues represents a notable deceleration from the trend seen in other recent periods.
In particular, the tech sector, which has enjoyed strong growth and was the major contributor to the broad market rally to start the year, has lost momentum due to weak earnings. The sector earnings beat ratio is the lowest in the preceding 20 quarters, while the revenue surprise is also toward the lower end of the 5-year range (read: Will the Nasdaq ETF Lose Shine on Weak Tech Earnings?).
We have profiled the ETFs in detail below:
MicroSectors Travel 3x Leveraged ETN (FLYU - Free Report) – Up 98.3%
MicroSectors Travel 3x Leveraged ETN offers three times (3X or 300%) exposure to the performance of the MerQube MicroSectors U.S. Travel Index. It has accumulated $7.1 million in its asset base since its debut in late June and charges 95 bps in annual fees.
MicroSectors Travel 3x Leveraged ETN trades in a paltry volume of 2,000 shares per day on average.
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) – Up 78.4%
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN seeks to offer three times leveraged exposure to the NYSE FANG Index, charging 95 bps in annual fees (read: 5 Leveraged ETFs That Took Flight in Strong January).
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN has accumulated $1.2 billion in its asset base and trades in an average daily volume of 2.6 million shares.
Direxion Daily Retail Bull 3X Shares (RETL - Free Report) – Up 56.1%
Direxion Daily Retail Bull 3X Shares offers three times leveraged exposure to the S&P Retail Select Industry Index.
Direxion Daily Retail Bull 3X Shares has amassed about $63.9 million in its asset base, while charging 95 bps in fees per year. It exchanges around 443,000 shares a day on average.
Daily S&P 500 High Beta Bull 3X Shares (HIBL - Free Report) – Up 54.9%
Daily S&P 500 High Beta Bull 3X Shares offers three times exposure to the performance of the S&P 500 High Beta Index. The index selects 100 securities to include in the index from the S&P 500 Index that have the highest sensitivity to market movements, or “beta,” over the past 12 months.
Daily S&P 500 High Beta Bull 3X Shares has garnered $86.7 million in its asset base and trades in an average daily volume of 204,000 shares. The fund charges 95 bps in fees per year from its investors.
Direxion Daily Consumer Discretionary Bull 3X Shares (WANT - Free Report) – Up 52.5%
Direxion Daily Consumer Discretionary Bull 3X Shares offers leveraged exposure play in the consumer discretionary sector. It provides three times exposure to the Consumer Discretionary Select Sector Index, charging 95 bps in annual fees (read: 4 ETFs to Tap on Solid Q4 GDP Numbers).
Direxion Daily Consumer Discretionary Bull 3X Shares has AUM of $31.4 million and an average daily volume of 82,000 shares.
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 the Leveraged Equity ETFs here).
Still, for ETF investors bullish on U.S. stocks for the near term, either of the above products can be an interesting choice. Clearly, a near-term long could be intriguing for those with high-risk tolerance and a belief that the trend is a friend in this corner of the investing world.