Editor's note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.
Takeaways
Mega-cap tech leadership may be cooling, opening the door for rotation into financials, real estate, and regional banks.
Rates and earnings remain key drivers, shaping sentiment across banks’ margins and real estate’s income appeal.
Leveraged and inverse ETFs give traders tools to express short-term bullish or bearish views on sector leadership shifts.
After years of mega-cap tech leadership, signs of broader market participation are emerging as a dynamic that could reshape sector leadership in 2026.
According to Bloomberg, growth in profit estimates for the famed “Magnificent 7” is slowing from prior years, even as the group continues to influence major indices overall. That has traders watching whether capital begins to shift into more traditional, cyclical corners of the market such as financials, real estate, and regional banks.
Against that backdrop, earnings from big U.S. financial institutions and persistent income-focused demand in real estate have set the stage for three distinct thematic expressions: cyclical financials, defensive income equity, and regional banking leadership.
Financials: Steady Beats, Mixed Sentiment
Bullish Financials Catalysts
Earnings strength among large banks: Fourth-quarter earnings reports pointed to resilience in trading, investment banking, and wealth management segments.
Valuation support from rates: Higher-for-longer rate expectations sustain net interest margins relative to prior years.
Value rotation chatter: The narrative of broader leadership beyond tech puts financials in a favorable cross-sector context.
For traders interested in expressing a bullish view on financial stocks, Direxion Daily Financial Bull 3X Shares (Ticker: FAS) seeks daily investment results, before fees and expenses, of 300% of the performance of the Financial Select Sector Index.
Bearish Financials Catalysts
Uneven stock responses despite beats: Some large banks declined on earnings news, indicating investor focus is as much on guidance as on current results.
Regulation and credit questions: Ongoing debate around capital deployment, credit quality, and regulatory costs could cloud sentiment.
Valuation nuances: Multiples may be stretched after recent strong performance.
For traders positioning for potential downside in the financial sector, Direxion Daily Financial Bear 3X Shares (Ticker: FAZ) seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite) of the performance of the Financial Select Sector Index.
Real Estate: Defensive Income in a Cautious Tape
Bullish Real Estate Catalysts
Yield appeal persists: In an environment where some investors are skittish about broader equity valuations, real estate investment trusts (REITs) offer historically high dividend streams.
Under-the-radar stability: REITs continue to attract attention as income anchors, even as equity markets waver.
Defensive positioning: Slower net operating income growth has tempered expectations but also elevated the income narrative.
For traders seeking amplified upside exposure to real estate stocks, Direxion Daily Real Estate Bull 3X Shares (Ticker: DRN) seeks daily investment results, before fees and expenses, of 300% of the performance of the Real Estate Select Sector Index.
Bearish Real Estate Catalysts
Slowing operating income: Net operating income growth decelerated in late 2025, underscoring pressure on fundamentals relative to prior cycles.
Macro caution shaping sentiment: Broader economic wariness, including consumer sentiment headwinds and labor-market concerns, may weigh on discretionary real estate demand.
Rate sensitivity remains real: Even modest changes in rate expectations can influence REIT prices given their income profile.
For traders aiming to capitalize on potential declines in real estate stocks, Direxion Daily Real Estate Bear 3X Shares (Ticker: DRV) seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite) of the performance of the Real Estate Select Sector Index.
Regional Banks: Quiet Leadership on the Cusp
Bullish Regional Banks Catalysts
Emerging leadership signal: As narratives of broadening market participation gain traction, regional banks have shown improved technical and relative performance characteristics.
Rotation-friendly positioning: These stocks often benefit when capital flows move away from concentrated mega-cap tech into more cyclical, value-oriented areas.
Sentiment shift potential: Even without the headline-grabbing momentum of tech, regional banks are nearing a technically significant inflection point that traders should watch.
Bearish Regional Banks Catalysts
Rate exposure and funding risk: Regional banks are more sensitive to shifts in yield curves and funding/deposit trends than larger diversified banks.
Credit quality caution: Slowing loan growth or rising provisions could challenge earnings power if macro stress intensifies.
Macro momentum tug: If rotation narratives stall or reverse, leadership could slip back into the largest tech names, slowing regional banking’s advance.
For traders focused on short-term opportunities in regional bank stocks, Direxion Daily Regional Banks Bull 3X Shares (Ticker: DPST) seeks daily investment results, before fees and expenses, of 300% of the performance of the S&P Regional Banks Select Industry Index.
What Traders Are Watching Next
Next earnings announcements from remaining large financials for guidance on loan growth and capital deployment.
Rate expectations and how they influence net interest margins for banks and cap rates for real estate.
Market breadth indicators, especially if broader participation gains traction beyond mega-cap tech.
Rotation is more talk than reality until leaders confirm it—but recent developments give traders plenty to watch in financials, real estate, and regional banking alike.
* Definitions and Index Descriptions
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
The Financial Select Sector Index (IXMTR) is provided by S&P Dow Jones Indices and includes securities of companies from the following industries: Banks; Thrifts & Mortgage Finance; Diversified Financial Services; Consumer Finance; Capital Markets; Insurance; and Mortgage Real Estate Investment Trusts (REITs).
The Real Estate Select Sector Index (IXRETR) is provided by S&P Dow Jones Indices (the “Index Provider”) and includes securities of companies from the following industries: real estate management and development and real estate investment trusts (“REITs”), excluding mortgage REITs.
The S&P Regional Banks Select Industry Index (SPSIRBKT) is a modified equal-weighted index that is designed to measure performance of the stocks comprising the S&P Total Market Index that are classified in the Global Industry Classification Standard (GICS) regional banks sub-industry.
One cannot directly invest in an index.
The “Select Sector Index” is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Rafferty. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Rafferty. Rafferty’s ETFs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Financial Select Sector Index.
The “Real Estate Sector Index” is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Rafferty Asset Management, LLC (“Rafferty”). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Rafferty. Rafferty’s ETFs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Real Estate Select Sector Index.
The “S&P Regional Banks Select Industry Index” is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Rafferty Asset Management, LLC (“Rafferty”). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Rafferty. Rafferty’s ETFs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P Regional Banks Select Industry Index.
Direxion Shares Risks – An investment in the Fund involves risk, including the possible loss of principal. The Fund is non-diversified and includes risks associated with the Fund’s concentrating its investments in a particular industry, sector, or geography which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause prices to fluctuate over time.
Leverage Risk – The Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day even if the Index does not lose all of its value. Leverage will also have the effect of magnifying any differences in the Fund’s correlation with the Index and may increase the volatility of the Fund.
Daily Index Correlation Risk – A number of factors may affect the Fund’s ability to achieve a high degree of correlation with the Index and therefore achieve its daily leveraged investment objective. The Fund’s exposure to the Index is impacted by the Index’s movement. Because of this, it is unlikely that the Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Fund being materially over- or under-exposed to the Index increases on days when the Index is volatile near the close of the trading day.
Banking Industry Risk – Companies within the banking industry can be adversely impacted by many factors, including, among others, changes in government regulations, economic conditions, and interest rates, credit rating downgrades, adverse public perception and decreased liquidity in credit markets.
Financials Sector Risk —Performance of companies in the financials sector may be materially impacted by many factors, including but not limited to, government regulations, economic conditions, credit rating downgrades, changes in interest rates and decreased liquidity in credit markets.
Real Estate Sector Risk – Investing in securities of real estate companies includes risks such as: fluctuations in the value of the underlying properties; periodic overbuilding and market saturation; changes in general and local economic conditions; catastrophic events such as natural disasters and terrorist acts; interest rates; changes in the availability, cost and terms of mortgage funds; and other economic, political or regulatory occurrences.
Additional risks of the Fund include Effects of Compounding and Market Volatility Risk, Market Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Other Investment Companies (including ETFs Risk), Cash Transaction Risk, and Passive Investment and Index Performance Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.
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