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Wall Street has been on a solid rally in May, buoyed by renewed Fed rate cut bets, solid corporate earnings and the artificial intelligence (AI) boom. All three major bourses hit record highs this month, touching new milestones. The S&P 500 crossed 5,300, the Dow Jones Industrial Average touched 40,000 and the Nasdaq Composite Index topped 17,000 for the first time ever (read: Nasdaq Tops 17K: 5 Best-Performing Stocks in ETF YTD).
For the month, the Nasdaq and S&P 500 have risen nearly 7% and 4%, respectively, while the Dow has gained just 0.8%.
Here, we highlight a bunch of the best-performing leveraged equity ETFs from different corners of the market that are leaders in their segments. These include T-REX 2X Long NVIDIA Daily Target ETF (NVDX - Free Report) , ProShares Ultra Semiconductors (USD - Free Report) , ProShares Ultra Silver (AGQ - Free Report) , Direxion Daily Global Clean Energy Bull 2X Shares (KLNE - Free Report) and Direxion Daily Utilities Bull 3X Shares (UTSL - Free Report) . These funds will continue to be investors’ darlings, 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 the use of swaps, futures contracts and other derivative instruments to accomplish their objectives.
The latest bouts of data showed that the U.S. economy is back on course for another solid GDP gain in the second quarter. U.S. business activity growth accelerated sharply to its fastest pace in more than two years in May after two months of slower growth, led by an upturn in the service sector. Consumer confidence, as indicated by the Conference Board’s gauge of sentiment, increased in May after three months of declines.
Wall Street is getting more bullish on stocks, given the improving outlook for both earnings and economic growth. Over the past two weeks, three equity strategists tracked by Yahoo Finance have boosted their year-end targets for the S&P 500. The median target on Wall Street for the benchmark index now sits at 5,250, up from the median target of 4,850 on Dec 30, per Bloomberg data.
Per the latest survey from Bank of America, expectations of interest rate cuts rather than earnings optimism have made investors the "most bullish" since November 2021. About 82% of global fund managers expect the first rate cut by the Fed in the second half, while 78% say a recession is unlikely in the next 12 months.
However, uncertainty about the timing of rate cuts continued to weigh on investors’ sentiment lately, curtailing some of the gains made until last week.
ETFs in Focus
T-REX 2X Long NVIDIA Daily Target ETF (NVDX - Free Report) – Up 53.3%
T-REX 2X Long NVIDIA Daily Target ETF seeks to magnify (200%) the daily performance of the NVIDIA Corp. (NVDA - Free Report) . It has AUM of $459.5 million and an expense ratio of 1.05%. T-REX 2X Long NVIDIA Daily Target ETF trades in average daily volume of 846,000 shares.
ProShares Ultra Semiconductors (USD - Free Report) – Up 31.4%
ProShares Ultra Semiconductors offers two times (200%) exposure to the daily performance of the Dow Jones U.S. Semiconductors Index. It has gathered $1 billion in its asset base and charges 95 bps in fees per year from investors. USD trades in an average daily volume of 310,000 shares.
ProShares Ultra Silver seeks to deliver two times the daily performance of the Bloomberg Silver Subindex. It has amassed $550.5 million and charges investors 95 bps in annual fees. The fund trades in an average daily volume of 1.5 million shares (read: ETFs Ride on Decade-High Silver Prices: Will the Rally Last?).
Direxion Daily Global Clean Energy Bull 2X Shares (KLNE - Free Report) – Up 23.5%
Direxion Daily Global Clean Energy Bull 2X Shares creates two times leveraged long position in the S&P Global Clean Energy Index. It charges an annual fee of 95 bps and trades in a lower average daily volume of about 11,000 shares. Direxion Daily Global Clean Energy Bull 2X Shares has accumulated $3.9 million in its asset base.
With AUM of $38.5 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 lower average daily volume of 215,000 shares (read: Here's Why Utility ETFs Are Scaling New Highs).
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).
Still, for ETF investors bullish on the stock market for the near term, either of the above products can be an interesting choice. Clearly, a near-term long could be intriguing for those with high-risk tolerance and a belief that the trend is the friend in this corner of the investing world.
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5 Best-Performing Leveraged ETFs of May
Wall Street has been on a solid rally in May, buoyed by renewed Fed rate cut bets, solid corporate earnings and the artificial intelligence (AI) boom. All three major bourses hit record highs this month, touching new milestones. The S&P 500 crossed 5,300, the Dow Jones Industrial Average touched 40,000 and the Nasdaq Composite Index topped 17,000 for the first time ever (read: Nasdaq Tops 17K: 5 Best-Performing Stocks in ETF YTD).
For the month, the Nasdaq and S&P 500 have risen nearly 7% and 4%, respectively, while the Dow has gained just 0.8%.
Here, we highlight a bunch of the best-performing leveraged equity ETFs from different corners of the market that are leaders in their segments. These include T-REX 2X Long NVIDIA Daily Target ETF (NVDX - Free Report) , ProShares Ultra Semiconductors (USD - Free Report) , ProShares Ultra Silver (AGQ - Free Report) , Direxion Daily Global Clean Energy Bull 2X Shares (KLNE - Free Report) and Direxion Daily Utilities Bull 3X Shares (UTSL - Free Report) . These funds will continue to be investors’ darlings, 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 the use of swaps, futures contracts and other derivative instruments to accomplish their objectives.
Earnings grew 6% in the first quarter of 2024, the highest rate of growth seen in nearly two years. NVIDIA’s (NVDA - Free Report) blockbuster earnings spread huge optimism in the stock market in recent weeks along with the global AI boom (read: NVIDIA's Explosive Earnings: Should You Buy the Stock or ETFs Now?).
The latest bouts of data showed that the U.S. economy is back on course for another solid GDP gain in the second quarter. U.S. business activity growth accelerated sharply to its fastest pace in more than two years in May after two months of slower growth, led by an upturn in the service sector. Consumer confidence, as indicated by the Conference Board’s gauge of sentiment, increased in May after three months of declines.
Wall Street is getting more bullish on stocks, given the improving outlook for both earnings and economic growth. Over the past two weeks, three equity strategists tracked by Yahoo Finance have boosted their year-end targets for the S&P 500. The median target on Wall Street for the benchmark index now sits at 5,250, up from the median target of 4,850 on Dec 30, per Bloomberg data.
Per the latest survey from Bank of America, expectations of interest rate cuts rather than earnings optimism have made investors the "most bullish" since November 2021. About 82% of global fund managers expect the first rate cut by the Fed in the second half, while 78% say a recession is unlikely in the next 12 months.
However, uncertainty about the timing of rate cuts continued to weigh on investors’ sentiment lately, curtailing some of the gains made until last week.
ETFs in Focus
T-REX 2X Long NVIDIA Daily Target ETF (NVDX - Free Report) – Up 53.3%
T-REX 2X Long NVIDIA Daily Target ETF seeks to magnify (200%) the daily performance of the NVIDIA Corp. (NVDA - Free Report) . It has AUM of $459.5 million and an expense ratio of 1.05%. T-REX 2X Long NVIDIA Daily Target ETF trades in average daily volume of 846,000 shares.
ProShares Ultra Semiconductors (USD - Free Report) – Up 31.4%
ProShares Ultra Semiconductors offers two times (200%) exposure to the daily performance of the Dow Jones U.S. Semiconductors Index. It has gathered $1 billion in its asset base and charges 95 bps in fees per year from investors. USD trades in an average daily volume of 310,000 shares.
ProShares Ultra Silver (AGQ - Free Report) – Up 28.4%
ProShares Ultra Silver seeks to deliver two times the daily performance of the Bloomberg Silver Subindex. It has amassed $550.5 million and charges investors 95 bps in annual fees. The fund trades in an average daily volume of 1.5 million shares (read: ETFs Ride on Decade-High Silver Prices: Will the Rally Last?).
Direxion Daily Global Clean Energy Bull 2X Shares (KLNE - Free Report) – Up 23.5%
Direxion Daily Global Clean Energy Bull 2X Shares creates two times leveraged long position in the S&P Global Clean Energy Index. It charges an annual fee of 95 bps and trades in a lower average daily volume of about 11,000 shares. Direxion Daily Global Clean Energy Bull 2X Shares has accumulated $3.9 million in its asset base.
Direxion Daily Utilities Bull 3X Shares (UTSL - Free Report) – Up 18.9%
With AUM of $38.5 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 lower average daily volume of 215,000 shares (read: Here's Why Utility ETFs Are Scaling New Highs).
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).
Still, for ETF investors bullish on the stock market for the near term, either of the above products can be an interesting choice. Clearly, a near-term long could be intriguing for those with high-risk tolerance and a belief that the trend is the friend in this corner of the investing world.