5 Best Leveraged ETFs of the First Nine Months of 2024

Wall Street has been enjoying a strong rally this year, defying slowdown fears, geopolitical tensions and the steep decline in “Magnificent Seven” stocks. The S&P 500 and the Dow Jones hit a series of new all-time highs and topped 5,700 and 42,000 milestones, respectively. The Nasdaq Composite Index is hovering near the 18,000 level. Most of the optimism is driven by rate cuts. 

This has resulted in a huge demand for leveraged ETFs as investors look to register big gains in a short span. We have highlighted a bunch of the best-performing leveraged equity ETFs that have gained more than 70% in the first nine months of 2024. These include T-REX 2X Long NVIDIA Daily Target ETF NVDX, ProShares Ultra Semiconductors USD, Direxion Daily Utilities Bull 3X Shares UTSL, BMO REX MicroSectors FANG+ Index 3X Leveraged ETN FNGU and MicroSectors Gold 3X Leveraged ETN SHNY. These funds seek to register big gains in a short span and will continue their strong trend, at least in the near term, provided the sentiments remain bullish.

Leveraged ETFs provide multiple exposures (2X or 3X) to the daily performance of the underlying index. These funds employ various investment strategies, such as the use of swaps, futures contracts and other derivative instruments to accomplish their objectives.

The technology sector was the outperformer in the first half but rate-cut optimism led to sector rotation in the third quarter. Investors shunned hot technology stocks in favor of smaller companies and the cyclical sectors, which are bigger beneficiaries of Fed rate cuts (read: 5 Sector ETFs Scaling New Highs on Fed Rate Cuts).

After all the speculation, Federal Reserve Chair Jerome Powell finally kicked off the new rate cycle era by initiating a 50 basis points cut in interest rates last week after holding it at a 23-year high for 14 consecutive months since July 2023. This marked the first rate cut since 2020 to address slowing economic growth and showed greater confidence in the fact that inflation is moving sustainably toward the 2% target level.

Lower rates lead to reduced borrowing costs for mortgages, credit cards and other consumer and business loans. These help businesses expand their operations more easily, resulting in increased profitability. This, in turn, stimulates economic growth and boosts the stock market.

ETFs in Focus

T-REX 2X Long NVIDIA Daily Target ETF (NVDX) – Up 344%

T-REX 2X Long NVIDIA Daily Target ETF seeks to magnify (200%) the daily performance of the NVIDIA. It has AUM of $651.6 million and an expense ratio of 1.05%. T-REX 2X Long NVIDIA Daily Target ETF trades in an average daily volume of 8.4 million shares.

ProShares Ultra Semiconductors (USD) – Up 123.5%

ProShares Ultra Semiconductors offers two times exposure to the daily performance of the Dow Jones U.S. Semiconductors Index. It has gathered $1.1 billion in its asset base and charges 95 bps in fees per year from investors. USD trades in an average daily volume of 717,000 shares.

Direxion Daily Utilities Bull 3X Shares (UTSL) – Up 88.9%

With AUM of $57.4 million, Direxion Daily Utilities Bull 3X Shares 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 170,000 shares.

BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU) – Up 82.5%

BMO REX MicroSectors FANG+ Index 3X Leveraged ETN seeks to offer three times leveraged exposure to the NYSE FANG Index. The Index includes 10 highly liquid stocks that represent industry leaders across today’s tech and Internet/media companies. BMO REX MicroSectors FANG+ Index 3X Leveraged ETN charges 95 bps in annual fees and trades in an average daily volume of around 1 million shares. It has accumulated $5.4 billion in its asset base.

MicroSectors Gold 3X Leveraged ETN (SHNY) – Up 70.3%

MicroSectors Gold 3X Leveraged ETN is linked to three times leveraged participation in the performance of the SPDR Gold Trust (GLD). It charges 95 bps in annual fees and trades in an average daily volume of about 25,000 shares. SHNY has accumulated $23.6 million in its asset base (read: Gold Mining ETFs Soar on Record Bullion Price).

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 these sectors 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 the friend in this corner of the investing world.

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