We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
December has been a brutal month for the U.S. stock market and snapped two consecutive months of gain. While recession fears triggered by the return of the Fed’s hawkish tone and rising COVID cases in China resulted in risk-off trading, a round of strong economic data lent some support to the stocks.
This has led to higher demand for leveraged and inverse-leveraged ETFs as these have fetched outsized returns on quick market turns in a short span. We highlight a bunch of the best-performing leveraged or inverse leveraged ETFs that have gained double digits in December. These include Direxion Daily CSI China Internet Index Bull 2X Shares (CWEB - Free Report) , Direxion Daily TSLA Bear 1X Shares (TSLS - Free Report) , MicroSectors Travel -3x Inverse Leveraged ETN (FLYD - Free Report) , MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report) , and Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares (DRIP - Free Report) . These will remain investors’ darlings, provided the sentiments remain volatile.
The Federal Reserve has raised interest rates by 50 bps this month to 4.25-4.50%, the highest level in 15 years, and revealed a hawkish view for next year. This marked the seventh rate hike this year in an unprecedented move to rein in inflation. The central bank now projects at least a 75 bps rate hike, peaking at 5.1% by the end of 2023, 50 bps higher than the 4.6% projected back in September. The rate will then be cut to 4.1% in 2024 (read: Top-Ranked ETFs to Play Fed's Seventh Rate Hike of 2022).
The hike came despite the fact that inflation is cooling down gradually. The consumer price index jumped 7.1% year over year in November, down from a 7.7% year-over-year increase in October and a recent peak of 9.1% in June. This represents the lowest annual increase since late 2021.
Additionally, the latest bouts of data indicate an improving economy. The economy added 263,000 jobs in November, marking another strong month of job growth. The unemployment rate remained at 3.7%, close to a 50-year low, while average hourly earnings jumped 0.6% from the prior month and 5.1% from the year-ago month. Meanwhile, business activity jumped the most since March 2021 in November, suggesting that the largest part of the economy remains resilient. ISM’s gauge of services rose to 56.5 last month from 54.4 in October.
Further, Americans have regained confidence in the U.S. economy, with consumer confidence bouncing back in December and reversing consecutive declines in October and November to reach its highest level since April, per the University of Michigan's Consumer Confidence Index. The Conference Board Consumer Confidence Index climbed to 108.3 from 101.4 in November.
Leveraged and Inverse-Leveraged ETFs
Leveraged and inverse-leveraged ETFs either create a leveraged long/short position, an inverse long/short position, or a leveraged inverse long/short position in the underlying index through the use of swaps, options, futures contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period, provided the trend remains a friend (see: all the Inverse Equity ETFs here).
However, these funds run the risk of huge losses compared to traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as weeks or months).
Investors should note that these products are suitable only for short-term traders as these are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than they appear.
Direxion Daily CSI China Internet Index Bull 2X Shares (CWEB - Free Report) – Up 49.9%
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 8.2 million shares. Direxion Daily CSI China Internet Index Bull 2X Shares has accumulated AUM of $355.7 million (read: China ETF Outperformers of Last Week).
Direxion Daily TSLA Bear 1X Shares seeks daily investment results of 100% of the inverse of the performance of the common shares of Tesla (TSLA). This inverse single-stock ETF tracks the price of a single stock rather than an index, eliminating the benefits of diversification. Direxion Daily TSLA Bear 1X Shares has accumulated $47.5 million in its asset base and trades in an average daily volume of 379,000 shares. It charges 95 bps in fees per year.
MicroSectors Travel -3x Inverse Leveraged ETN offers three times (3X or 300%) inverse exposure to the performance of the MerQube MicroSectors U.S. Travel Index, which measures the performance of large, liquid U.S. listed and domiciled companies operating in the RBICS Sub Industries related to travel and tourism. It has gathered $2.3 million in its asset base since its debut six months ago. MicroSectors Travel -3x Inverse Leveraged ETN charges 95 bps in fees per year and trades in an average daily volume of 7,000 shares.
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 $117.8 million in its asset base since its debut last December and charges 95 bps in annual fees. MicroSectors Gold Miners 3X Leveraged ETN trades in an average daily volume of 375,000 shares.
Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares (DRIP - Free Report) – Up 16%
Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares seeks two times inverse exposure to the performance of the S&P Oil & Gas Exploration & Production Select Industry Index. Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares has amassed $90.3 million in its asset base and trades in solid volume of around 16.6 million shares a day on average. The fund charges 95 bps in annual fees (read: Energy ETFs Beat S&P 500 in 2022, More Gains Likely in 2023).
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
5 Best Leveraged or Inverse ETFs of December
December has been a brutal month for the U.S. stock market and snapped two consecutive months of gain. While recession fears triggered by the return of the Fed’s hawkish tone and rising COVID cases in China resulted in risk-off trading, a round of strong economic data lent some support to the stocks.
This has led to higher demand for leveraged and inverse-leveraged ETFs as these have fetched outsized returns on quick market turns in a short span. We highlight a bunch of the best-performing leveraged or inverse leveraged ETFs that have gained double digits in December. These include Direxion Daily CSI China Internet Index Bull 2X Shares (CWEB - Free Report) , Direxion Daily TSLA Bear 1X Shares (TSLS - Free Report) , MicroSectors Travel -3x Inverse Leveraged ETN (FLYD - Free Report) , MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report) , and Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares (DRIP - Free Report) . These will remain investors’ darlings, provided the sentiments remain volatile.
The Federal Reserve has raised interest rates by 50 bps this month to 4.25-4.50%, the highest level in 15 years, and revealed a hawkish view for next year. This marked the seventh rate hike this year in an unprecedented move to rein in inflation. The central bank now projects at least a 75 bps rate hike, peaking at 5.1% by the end of 2023, 50 bps higher than the 4.6% projected back in September. The rate will then be cut to 4.1% in 2024 (read: Top-Ranked ETFs to Play Fed's Seventh Rate Hike of 2022).
The hike came despite the fact that inflation is cooling down gradually. The consumer price index jumped 7.1% year over year in November, down from a 7.7% year-over-year increase in October and a recent peak of 9.1% in June. This represents the lowest annual increase since late 2021.
Additionally, the latest bouts of data indicate an improving economy. The economy added 263,000 jobs in November, marking another strong month of job growth. The unemployment rate remained at 3.7%, close to a 50-year low, while average hourly earnings jumped 0.6% from the prior month and 5.1% from the year-ago month. Meanwhile, business activity jumped the most since March 2021 in November, suggesting that the largest part of the economy remains resilient. ISM’s gauge of services rose to 56.5 last month from 54.4 in October.
Further, Americans have regained confidence in the U.S. economy, with consumer confidence bouncing back in December and reversing consecutive declines in October and November to reach its highest level since April, per the University of Michigan's Consumer Confidence Index. The Conference Board Consumer Confidence Index climbed to 108.3 from 101.4 in November.
Leveraged and Inverse-Leveraged ETFs
Leveraged and inverse-leveraged ETFs either create a leveraged long/short position, an inverse long/short position, or a leveraged inverse long/short position in the underlying index through the use of swaps, options, futures contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period, provided the trend remains a friend (see: all the Inverse Equity ETFs here).
However, these funds run the risk of huge losses compared to traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as weeks or months).
Investors should note that these products are suitable only for short-term traders as these are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than they appear.
Direxion Daily CSI China Internet Index Bull 2X Shares (CWEB - Free Report) – Up 49.9%
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 8.2 million shares. Direxion Daily CSI China Internet Index Bull 2X Shares has accumulated AUM of $355.7 million (read: China ETF Outperformers of Last Week).
Direxion Daily TSLA Bear 1X Shares (TSLS - Free Report) – Up 49.2%
Direxion Daily TSLA Bear 1X Shares seeks daily investment results of 100% of the inverse of the performance of the common shares of Tesla (TSLA). This inverse single-stock ETF tracks the price of a single stock rather than an index, eliminating the benefits of diversification. Direxion Daily TSLA Bear 1X Shares has accumulated $47.5 million in its asset base and trades in an average daily volume of 379,000 shares. It charges 95 bps in fees per year.
MicroSectors Travel -3x Inverse Leveraged ETN (FLYD - Free Report) – Up 26.2%
MicroSectors Travel -3x Inverse Leveraged ETN offers three times (3X or 300%) inverse exposure to the performance of the MerQube MicroSectors U.S. Travel Index, which measures the performance of large, liquid U.S. listed and domiciled companies operating in the RBICS Sub Industries related to travel and tourism. It has gathered $2.3 million in its asset base since its debut six months ago. MicroSectors Travel -3x Inverse Leveraged ETN charges 95 bps in fees per year and trades in an average daily volume of 7,000 shares.
MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report) – Up 16.7%
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 $117.8 million in its asset base since its debut last December and charges 95 bps in annual fees. MicroSectors Gold Miners 3X Leveraged ETN trades in an average daily volume of 375,000 shares.
Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares (DRIP - Free Report) – Up 16%
Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares seeks two times inverse exposure to the performance of the S&P Oil & Gas Exploration & Production Select Industry Index. Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares has amassed $90.3 million in its asset base and trades in solid volume of around 16.6 million shares a day on average. The fund charges 95 bps in annual fees (read: Energy ETFs Beat S&P 500 in 2022, More Gains Likely in 2023).