ETFs
5 Best Performing Leveraged ETFs of May
Wall Street saw a strong rally in May, supported by new Fed rate cut bets, strong corporate profits and the artificial intelligence (AI) boom. All three major exchanges hit record highs this month, hitting new milestones. The S&P 500 surpassed 5,300, the Dow Jones Industrial Average touched 40,000 and the Nasdaq Composite Index surpassed 17,000 for the first time ever (read: Nasdaq Tops 17K: 5 Best Performing Stocks in ETFs Since Debut of the year).
For the month, the Nasdaq and S&P 500 rose nearly 7% and 4%, respectively, while the Dow Jones gained just 0.8%.
Here we highlight a set of top-performing leveraged stock ETFs from different corners of the market that are leaders in their segments. These include ETF T-REX 2X Long NVIDIA Daily Target NVDX, ProShares Ultra Semiconductors USD, ProShares Ultra Silver AGQ, Direxion Daily Global Clean Energy Bull 2X Stock KLNE and Direxion Daily Utilities Bull 3X Stock UTSL. These funds will continue to be investors’ darlings, at least in the short term, provided 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 and other derivative instruments to achieve their objectives.
Profits rose 6% in the first quarter of 2024, the highest growth rate seen in almost two years. NVIDIA’s blockbuster earnings on NVDA have sparked huge optimism in the stock market in recent weeks, alongside the global AI boom (read: NVIDIA’s Explosive Earnings: Should You Buy Stocks or ETFs Now?).
The latest data series showed that the US economy is once again on track for another solid rise in GDP in the second quarter. Growth in U.S. business activity accelerated sharply to its fastest pace in more than two years in May, following two months of slower growth, driven by a recovery in the services sector. Consumer confidence, as indicated by the Conference Board Confidence Index, increased in May after three months of decline.
Wall Street is becoming more bullish on stocks, given the improving outlook for earnings and economic growth. Over the past two weeks, three equity strategists tracked by Yahoo Finance have raised their year-end targets for the S&P 500. The median target on Wall Street for the benchmark index now stands at 5,250, up from 4 850 on December 30. , according to Bloomberg data.
According to the latest Bank of America survey, expectations of lower interest rates rather than earnings optimism have made investors the “most optimistic” since November 2021. Around 82% of global fund managers are expect a first rate cut from the Fed in the second half of the year, while 78% say a recession is unlikely over the next 12 months.
However, uncertainty over the timing of rate cuts has continued to weigh on investor confidence of late, reducing some of the gains made through last week.
The story continues
Focus on ETFs
T-REX 2X Long NVIDIA Daily Target ETF (NVDX) – Up 53.3%
The T-REX 2X Long NVIDIA Daily Target ETF seeks to amplify (200%) the daily performance of NVIDIA Corp. It has assets under management of $459.5 million and an expense ratio of 1.05%. The T-REX 2X Long NVIDIA Daily Target ETF trades in an average daily volume of 846,000 shares.
ProShares Ultra Semiconductors (USD) – Up 31.4%
ProShares Ultra Semiconductors provides two times (200%) exposure to the daily performance of the Dow Jones US Semiconductors Index. It has amassed $1 billion in its asset base and charges investors 95 basis points in fees annually. USD trades in an average daily volume of 310,000 shares.
ProShares Ultra Silver (AGQ) – Up 28.4%
ProShares Ultra Silver seeks to deliver twice the daily performance of the Bloomberg Silver subindex. It has raised $550.5 million and charges investors 95 basis points in annual fees. The fund trades an average daily volume of 1.5 million shares (read: ETFs are riding silver prices, which have hit decade highs: will the rally last?).
Direxion Daily Global Clean Energy Bull 2X (KLNE) Stock – Up 23.5%
Direxion Daily Global Clean Energy Bull 2X shares create a double-leveraged long position in the S&P Global Clean Energy Index. It charges an annual fee of 95 basis points and trades a lower average daily volume of around 11,000 shares. Direxion Daily Global Clean Energy Bull 2X shares have accumulated $3.9 million in its asset base.
Direxion Daily Utilities Bull 3X (UTSL) Stock – Up 18.9%
With $38.5 million in assets under management, Direxion Daily Utilities Bull 3X shares provide three times the performance of the Utilities Select Sector Index. It charges investors an annual fee of 95 basis points and trades a lower average daily volume of 215,000 shares (read: Here’s why utility ETFs are hitting new highs).
Conclusion
As a caveat, investors should note that these products are extremely volatile and are only suitable for short-term traders. Additionally, daily rebalancing – when combined with leverage – can cause these products to deviate significantly from expected long-term performance (see: all leveraged stock ETFs here ).
Still, for ETF investors bullish on the stock market in the short term, either of the above products may be an attractive choice. Obviously, a short-term long position could be intriguing to those who have a high risk tolerance and believe that the trend is the friend of this corner of the investing world.
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NVIDIA Corporation (NVDA): Free Stock Analysis Report
ProShares Ultra Silver (AGQ): ETF Research Reports
ProShares Ultra Semiconductors (USD): ETF Research Reports
Direxion Daily Utilities Bull 3X Stock (UTSL): ETF Research Reports
Direxion Daily Global Clean Energy Bull 2X Stock (KLNE): ETF Research Reports
T-REX 2X Long NVIDIA Daily Target ETF (NVDX): ETF Research Reports