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Best Leveraged ETFs of Q3

Sanghamitra Saha
Rockwell Automation's (ROK) performance will likely be affected by concerns in Europe and tariffs despite strength in heavy industries, a favorable manufacturing environment, and acquisitions.

The third-quarter of 2018 was all about ebbs and flows in trade tensions. While signs of improvement were noticed in the trade terms between the United States and the Euro zone and Mexico, trade relations turned bitter with China (read: Buy High-Beta & Momentum ETFs on US-EU Trade Truce).

Also, thanks to a hawkish Fed and the resultant rise in the greenback as well as worsening diplomatic U.S.-Turkey relations, there was an acute selloff in the emerging markets. All these events basically pulled the strings globally in Q3.

The S&P 500-based ETF SPY has gained about 7.4%, the Dow Jones-based ETF DIA has rallied 9.4% while the Nasdaq 100-based QQQ has advanced around 7.7% (as of Sep 24, 2018). Needless to say, such stellar gains have had a significant impact on the leveraged ETFs.

These ETFs provide multiple-times exposure to the performance of the underlying index. These funds employ various investment strategies such as use of swaps, futures contracts and other derivative instruments to accomplish their objectives.

Since most of these ETFs seek to attain their goals on a daily basis, their performance could vary significantly over a longer period when compared to the shorter period due to their compounding effect. Still, the space remains attractive for investors seeking high returns in a short time.

Below we highlight the five top-performing leveraged ETFs of Q3.

Direxion Daily Healthcare Bull 3X ETF CURE – Up 43.9%

Health-care stocks hauled in solid assets in Q3 and has been one of the top performers so far this quarter. Global trade crisis has given the sector’s defensive tilt and non-cyclical nature a boost. Also, the U.S. health care supply chain is consolidating fast, with deals across the industry ranging from insurers, pharmacies to drug distributors.

Plus, President Trump’s announcement of the drug plans in May was in the best interest of pharma companies. All these have led CURE to add about 43.9% in the quarter to date, per XTF.com (as of Sep 24, 2018) (read: Health Care ETFs Outperforming: Will the Rally Last?).

Direxion Daily Aerospace & Defense Bull 3X Shares ETF DFEN – Up 33.7%

This has been yet another soaring sector. In mid-August, President Trump signed the $717-billion 2019 defense spending bill into law — the largest allotted to U.S. defense. Pentagon’s base budget holds $616.9 billion, overseas contingency operations have been authorized $69 billion and nuclear weapons programs hold $21.9 billion under the Energy Department. Also, compensations for troops have been raised by 2.6%, marking the biggest increase in almost a decade (read: Must-Have Aerospace and Defense ETFs & Stocks).

ProShares UltraPro Dow30 UDOW – Up 30.5%

After the worst first half performance since 2010, the Dow Jones rebounded to show some strength in the third quarter. There were a flurry of solid corporate earnings and upbeat news from the Dow component. The uptrend in the energy sector also gave a boost to the fund (read: Dow Springs Back: More Upside for ETFs?).

Direxion Daily Transportation Bull 3X Shares ETF TPOR – Up 30.3%

The transportation sector has also performed well in Q3 due to economic growth. Rising U.S. GDP, robust job gains, moderate wage growth, record consumer confidence and higher spending and week-long Labor Day travel helped the fund to add solid returns (read: Transport ETFs Riding High on Solid Q2 Earnings).

Direxion Daily Industrials Bull 3X Shares ETF DUSL – Up 27.9%

U.S. manufacturing is in great shape. Output rose 3.1% year over year in August 2018, after 2.6% advancement in July. It marked the sharpest increase in manufacturing production since June 2012. The IHS Markit US Manufacturing PMI increased to 55.6 in September of 2018 from 54.7 in August, beating market expectations of 55. The reading hinted at the sturdiest expansion in manufacturing in four months, mainly driven by faster increases in output and new orders (read: Top-Ranked Sector ETFs & Stocks to Buy Now).

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SPDR-DJ IND AVG (DIA): ETF Research Reports
PRO-ULT DOW30 (UDOW): ETF Research Reports
NASDAQ-100 SHRS (QQQ): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
DIRX-D HC BL3X (CURE): ETF Research Reports
DIR-D TRAN BL3X (TPOR): ETF Research Reports
DIR-D INDU BL3X (DUSL): ETF Research Reports
DIR-D A&D BL3X (DFEN): ETF Research Reports
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