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5 Best Leverage ETF Areas to Watch as Markets Bounces Back

·4 min read

Wall Street started the week on a shaky note due to a spike in U.S. COVID cases, which is a potential threat to economic reopening. The Dow Jones logged a 725-point loss last Monday, marking the worst day since October. The benchmark U.S. treasury yield fell to 1.19% on Jul 19.

However, investors shrugged off fears and again entered the market rally with full enthusiasm. The Dow Jones then enjoyed its strongest two-day (on Jul 20 and Jul 21) rally since March. The S&P 500 and the Nasdaq too are in fine fettle. Upbeat earnings results have probably helped the markets to bounce back.

The small-cap benchmark Russell 2000 Index saw the biggest rebound with a 1.7% gain. The 10-year yield too jumped back to 1.30%. Many of the stocks that were hit the hardest on Jul 19, on concerns about the COVID-19 Delta variant, bounced back in the days that followed. Airlines and cruise companies spearheaded the revival.

Against this backdrop, below we highlight a few leveraged ETFs that gained the most on Jul 21 (read: Best-Performing Leveraged ETFs of the First Half).

ETFs in Focus

Energy 

Oil prices jumped lately as demand hopes outweighed the stock build in the United States. JPMorgan analysts said global demand is expected to average 99.6 million barrels per day (mbd) in August, up by 5.4 mbd from April, as quoted on Reuters.

Microsectors U.S. Big Oil Index 3X ETN NRGU – Up 12.2%

S&P Oil & Gas Exploration Bull 3X Direxion (GUSH) – Up 9.84%

Semiconductor

Semiconductors have shown strong resilience amid the coronavirus pandemic on the stay-at-home trend, which has bolstered the demand for gaming chips and data center business. Moreover, Apple is reportedly asking suppliers to boost the production of its next-generation iPhones by 20%, according to a Bloomberg News, as quoted on CNBC. The very news further boosted the demand for semiconductors (read: Apple ETFs at Record High: Further Potential on iPhone Optimism).

Semiconductor Bull 3X Direxion SOXL – Up 9.15%

High Beta

The renewed risk-on sentiments on Wall Street helped high-beta stocks.  Additionally, the return of strong corporate earnings growth and a healing labor market have bolstered investors’ confidence, driving the appeal of the riskier assets.

S&P 500 High Beta Bull 3X Direxion HIBL – Up 8.95%

Silver Mining

A rebound in risk sentiment, as investors ignored rising cases of the Delta coronavirus variant, boosted industrial stocks. Since silver is viewed as an industrial metal, silver mining stocks gained materially on Jul 21.

ETFMG Prime 2X Daily Junior Silver Miners ETF SILX – Up 8.94%

Healthcare

Earnings expectations of the healthcare sector are upbeat as the sector is likely to log 14.6% growth in the second quarter of 2021 on revenue growth of 15.7%, per the Earnings Trends issued on Jul 14, 2021. The spread of the Delta variant of COVID-19 should boost demand for vaccine makers, and other pharma and healthcare companies. Most recently, Moderna (MRNA), known for its success in the COVID-19 vaccine, entered the big league with its addition to the S&P 500 Index.

Pharmaceutical & Medical Bull 3X Direxion PILL – Up 7.87%

Bottom Line

Investors should note that while following leveraged investing strategy is highly beneficial for short-term traders, it could lead to huge losses compared to traditional funds in fluctuating or seesawing markets. Further, the funds’ performances could vary significantly from the actual performance of their underlying index over a longer period when compared to the shorter period (such as weeks or months) due to their compounding effect (see: all the Leveraged Equity ETFs here).


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Direxion Daily Semiconductor Bull 3X Shares (SOXL): ETF Research Reports
 
Direxion Daily Pharmaceutical & Medical Bull 3X Shares (PILL): ETF Research Reports
 
MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU): ETF Research Reports
 
Direxion Daily S&P 500 High Beta Bull 3X Shares (HIBL): ETF Research Reports
 
ETFMG Prime 2x Daily Junior Silver Miners ETF (SILX): ETF Research Reports
 
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Zacks Investment Research