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U.S. stocks are on track to post another blockbuster year. The S&P 500 has climbed 24%, marking one of its best consecutive years since 1997 and 1998, and notched 57 record closes. The Dow Jones Industrial and the Nasdaq Composite have risen 13% and 29.8%, respectively.

While geopolitics and global growth slowdown concerns continued to make investors jittery, the adoption of artificial intelligence (AI), the rate cut wave and hopes of growth under President-elect Trump's administration drove the stocks. 

This has resulted in huge demand for leveraged ETFs as investors look to register big gains in a short span. We have highlighted a bunch of the best-performing leveraged equity ETFs from different corners of the market that have gained more than 65% in 2024. These include BMO REX MicroSectors FANG+ Index 3X Leveraged ETN, Direxion Daily Financial Bull 3X Shares, Direxion Daily Consumer Discretionary Bull 3X Shares, ProShares Ultra Communication Services and MAX S&P 500 4X Leveraged ETN. These funds seek to register big gains in a short span and will continue their strong trend, 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 technology sector has been an outperformer in 2024. Notably, the so-called "Magnificent Seven" stocks have been among the big forces driving the broad market rally and their market-cap valuations have surpassed $18 trillion for the first time ever. The expansion of AI applications holds the promise of ushering in fresh growth opportunities in the tech sector and beyond. 

The Fed cut interest rates three times in 2024 but signaled a more cautious approach heading into 2025 amid sticky inflation . Lower rates reduce borrowing costs for mortgages, credit cards, and other consumer and business loans. These help businesses expand their operations more easily, resulting in increased profitability. This, in turn, stimulates economic growth and boosts the stock market.

President-elect Donald Trump’s win in November also proved a boon for the market, fueling hopes of deregulation, lower corporate tax rates and a focus on the U.S. economy, which has been resilient.

ETFs in Focus
 

BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) – Up 164.1%

BMO REX MicroSectors FANG+ Index 3X Leveraged ETN seeks to offer three times leveraged exposure to the NYSE FANG Index. The Index includes 10 highly liquid stocks that represent industry leaders across today’s tech and Internet/media companies. BMO REX MicroSectors FANG+ Index 3X Leveraged ETN charges 95 bps in annual fees and trades in an average daily volume of around 719,000 shares. It has accumulated $8.6 billion in its asset base.

Direxion Daily Financial Bull 3x Shares (FAS - Free Report) – Up 84.6%

Direxion Daily Financial Bull 3x Shares seeks to make a large profit from the bullish trend in the financial sector. It provides three times exposure to the performance of the Financial Select Sector Index. Direxion Daily Financial Bull 3x Shares has amassed $2.6 billion in its asset base while trading in a volume of 556,000 shares. It charges 90 bps in annual fees.

Direxion Daily Consumer Discretionary Bull 3X Shares (WANT - Free Report) – Up 69.7%

Direxion Daily Consumer Discretionary Bull 3X Shares offers leveraged exposure to the consumer discretionary sector. It provides three times exposure to the Consumer Discretionary Select Sector Index, charging 95 bps in annual fees. Direxion Daily Consumer Discretionary Bull 3X Shares has an AUM of $36.9 million and an average daily volume of 42,000 shares.

ProShares Ultra Communication Services (LTL - Free Report) – Up 68.9%

ProShares Ultra Communication Services offers two times the daily performance of the S&P Communication Services Select Sector Index. It has gathered $8.8 million in its asset base and charges 95 bps in fees per year from investors. LTL trades in an average daily volume of 2,000 shares.

MAX S&P 500 4X Leveraged ETN (SPYU - Free Report) – Up 68.5%

MAX S&P 500 4X Leveraged ETN is linked to a four times leveraged participation in the daily performance of the S&P 500 Total Return Index. It charges 95 bps in annual fees and has amassed $170.3 million in its asset base.

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.

Yet, for ETF investors bullish on these sectors in the near term, any of the above-mentioned products can be an interesting choice. 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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