5 Leveraged ETFs That Witnessed Double-Digit Gains in January

Amid several twists and turns, the three major indices logged gains in January, with the Dow up 4.7%, the S&P 500 up 2.7% and the Nasdaq up 1.6%. This led to a spike in leveraged ETFs as investors looked to register big gains in a short span. 

We have highlighted a bunch of the best-performing leveraged equity ETFs from different corners of the market that gained in double digits in January. These include MicroSectors Gold Miners 3X Leveraged ETN GDXU, Direxion Daily Dow Jones Internet Bull 3X Shares WEBL, Direxion Daily Aerospace & Defense Bull 3X Shares DFEN, Direxion Daily Healthcare Bull 3X Shares CURE and Direxion Daily Financial Bull 3X Shares FAS.

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 swaps, futures contracts and other derivative instruments, to accomplish their objectives.

Snapshot of Market Trend

U.S. stocks declined for two consecutive weeks at the start of January and gained momentum after Trump took office on Jan. 20. Though President Donald Trump’s economic growth policies and advancements in AI bolstered investors' sentiment, trade tariff talks led to risk-off trade. 

A solid start to corporate earnings also drove the stocks higher but the rapid emergence of DeepSeek, a China-based artificial intelligence startup, raised concerns about the future of American tech supremacy, and affected the risk appetite globally.

Let’s discuss these events below:

Trump Inauguration: President Donald Trump's inauguration bolstered investor optimism, driven by expectations of deregulation and pro-business policies. The S&P 500 had its best first week after the start of a presidency since Ronald Reagan assumed power in 1985 (read: 5 Stocks That Powered S&P 500 ETF in Trump's First Week). 

Tariff Threats: Trump has levied 25% tariffs on Canada and Mexico and 10% on China, citing that the measures were necessary to combat illegal immigration and drug trade. The move will drive U.S. inflation faster than expected and hurt consumers, driving up the prices of goods and curtailing spending. It will also affect the global economy and corporate profits, particularly that of big U.S. exporters. However, Trump paused Mexico and Canada tariffs on Monday while tariffs on China are still in place.

Corporate Earnings: The picture emerging from the fourth-quarter earnings season continues to be one of strength, with companies not only beating estimates but also providing reassuring guidance for the coming quarters. Total earnings of the 179 S&P 500 members that have reported so far, or 35.8% of the index’s total membership, are up 7.4% from the same period last year on 5.1% higher revenues, with 80.4% beating EPS estimates and 67% beating revenue estimates. This is a better performance from the same group members than the other recent periods.  

DeepSeek: DeepSeek took over rival OpenAI’s coveted spot for the most downloaded free app in the United States on Apple’s App Store, dethroning ChatGPT. This one-year-old startup is now seen as a strong rival to OpenAI and Meta as its technology is more cost-effective and operates on less powerful chips. Initially, the news shook tech stocks, especially those related to AI hardware like NVIDIA (NVDA) but later the stock market demonstrated resilience, with companies rebounding after initial declines (read: ETFs to Play as Markets Rebound After DeepSeek Sell-Off).

Steady Rates: The Fed kept the key interest rate steady, as expected, in its last meeting following a series of rate cuts since September 2024. The central bank dropped from its latest policy statement language saying that inflation "has made progress" toward the Fed's 2% inflation goal, noting only that the pace of price increases "remains elevated." This reflects looming concerns over future inflation and uncertainty about Trump’s trade tariff policies.

Leveraged ETFs in Focus

MicroSectors Gold Miners 3X Leveraged ETN (GDXU) – Up 44.1%

MicroSectors Gold Miners 3X Leveraged ETN seeks to deliver three times (3X or 300%) the performance of the S-Network MicroSectors Gold Miners Index. It has amassed $310.3 million in its asset base and charges 95 bps in annual fees. MicroSectors Gold Miners 3X Leveraged ETN trades in an average daily volume of 814,000 shares.

Direxion Daily Dow Jones Internet Bull 3X Shares (WEBL) – Up 23.7%

Direxion Daily Dow Jones Internet Bull 3X Shares provides three times leveraged play on the Internet corner of the broad technology sector by tracking the Dow Jones Internet Composite Index. It has attracted $189.2 million in its asset base and charges 95 bps in annual fees. The product sees an average daily volume of 391,000 shares.

Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN) – Up 23%

Direxion Daily Aerospace & Defense Bull 3X Shares creates three times leveraged long position in the Dow Jones U.S. Select Aerospace & Defense Index. It charges an annual fee of 93 bps and trades in a good average daily volume of about 207,000 shares. Direxion Daily Aerospace & Defense Bull 3X Shares has AUM of $199 million.

Direxion Daily Healthcare Bull 3X Shares (CURE) – Up 19.6%

Direxion Daily Healthcare Bull 3X Shares creates a three times leveraged long position in the Health Care Select Sector Index. It charges 91 bps in fees a year. Direxion Daily Healthcare Bull 3X Shares has $200.9 million in AUM and trades in volumes of 54,000 shares on average.

Direxion Daily Financial Bull 3x Shares (FAS) – Up 18.9%

Direxion Daily Financial Bull 3x Shares seeks to make a large profit from the bullish trend in the financial sector. It provides three times exposure to the performance of the Financial Select Sector Index. Direxion Daily Financial Bull 3x Shares has amassed $2.9 billion in its asset base while trading in a volume of 627,000 shares. It charges 90 bps in annual fees.

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).

Yet, for ETF investors who are bullish on these sectors in the near term, any of the abovementioned products can be an interesting choice. 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.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research