5 Leveraged ETFs With Double-Digit Gains Halfway Through Q1

Amid the tariff trade war fears, economic slowdown concerns and roaring inflation, Wall Street has been on a bull run halfway through the first quarter. The S&P 500 touched record highs on several occasions, having risen 2.2%, while the Dow Jones and the Nasdaq Composite Index gained 2.1% and 1.1%, respectively.

We have highlighted a bunch of the best-performing leveraged equity ETFs from different corners of the market that gained double digits halfway through the first quarter. These include MicroSectors Gold Miners 3X Leveraged ETN GDXU, Direxion Daily CSI China Internet Index Bull 2X Shares CWEB, Direxion Daily MSCI Emerging Markets Bull 3x Shares EDC, Direxion Daily Healthcare Bull 3X Shares CURE and Direxion Daily Utilities Bull 3X Shares UTSL.

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.

A combination of advancements in AI, solid corporate earnings season and lower rates are driving the rally. The rally has broadened beyond the "Magnificent Seven" to other sectors like financials and industrials this year. Though the Fed has signaled no rush to reduce interest rates further as inflation remains elevated, since September 2024, it has made a series of rate cuts, by a total of 100 bps (read: Only One Rate Cut Expected in 2025? ETFs to Play). 

However, the latest economic data points to a slowdown in the economy. U.S. business activity nearly stalled in February, while consumer sentiment dropped to a 15-month low. Consumers' 12-month inflation expectations deteriorated to 4.3%, the highest reading since November 2023, from 3.3% in January. Over the next five years, consumers expect inflation to be 3.5%, the highest since 1995, compared with 3.2% in January, according to the latest survey. 

Additionally, concerns are building up in the homebuilder space that tariffs would raise the cost of building materials, including lumber and appliances, thereby leading to elevated home prices and reduced affordability. Homebuilder sentiment dropped to a five-month low in February. 

Further, President Donald Trump's tariff talks, which could lead to a global trade war, have been weighing on the stock market. 

Leveraged ETFs in Focus

MicroSectors Gold Miners 3X Leveraged ETN (GDXU) – Up 60.6%

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 $392.2 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 786,000 shares.

Direxion Daily CSI China Internet Index Bull 2X Shares (CWEB) – Up 52.9%

Direxion Daily CSI China Internet Index Bull 2X Shares offers twice the leveraged exposure to China’s Internet market by tracking the CSI Overseas China Internet Index. It charges an annual fee of 88 bps and trades in an average daily volume of about 751,000 shares. Direxion Daily CSI China Internet Index Bull 2X Shares has accumulated AUM of $418.6 million (read: What's Behind the Surge in Chinese Tech Stocks & ETFs?). 

Direxion Daily MSCI Emerging Markets Bull 3x Shares (EDC) – Up 20.5%

Direxion Daily MSCI Emerging Markets Bull 3x Shares seeks to provide three times the performance of the MSCI Emerging Markets Index. It has amassed $84.4 million in its asset base and trades in a volume of 87,000 shares. Direxion Daily MSCI Emerging Markets Bull 3x Shares charges 95 bps in annual fees.

Direxion Daily Healthcare Bull 3X Shares (CURE) – Up 17.5%

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 $179 million in AUM and trades in volumes of 56,000 shares on average.

Direxion Daily Utilities Bull 3X Shares (UTSL) – Up 15.4%

With AUM of $46.3 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 good average daily volume of 155,000 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).

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.
 

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This article originally published on Zacks Investment Research (zacks.com).

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