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The fourth quarter of 2024 has been volatile for the U.S. stock market. After a subdued October, November turned out to be the strongest month of the year, driven by the post-election rally following President-elect Donald Trump’s victory. The gains extended in early December on the resurgence of tech stocks.

The Dow Jones Industrial Average crossed the 45,000 milestone for the first time, while the S&P 500 touched nearly 6,100. Meanwhile, the tech-heavy index topped the 20,000 milestone for the first time. However, the superb rally faltered mid-month due to the Fed’s less dovish stance. 

This resulted in a 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 ETFs that led the way in the fourth quarter. These include CoinShares Valkyrie Bitcoin Futures Leveraged Strategy ETF (BTFX - Free Report) , Direxion Daily Dow Jones Internet Bull 3X Shares (WEBL - Free Report) , Direxion Daily Consumer Discretionary Bull 3X Shares (WANT - Free Report) , Direxion Daily Cloud Computing Bull 2X Shares (CLDL - Free Report) and BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) . 

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.

Wall Street remains optimistic about the incoming administration’s economic agenda. Though Trump’s policies on restricting illegal immigration, enacting new tariffs, lowering taxes and reducing regulations will accelerate inflation, limiting the Federal Reserve's ability to cut rates, they will likely boost the economy. Additionally, the AI boom will continue to fuel a rally in the stock market. 

Though the Fed is cautious about future rate cuts, projecting fewer rate cuts than previously expected, it has slashed interest rates three times in the past three months, bringing down the benchmark rate to 4.25-4.50%. Lower interest rates lead to reduced borrowing costs that help businesses expand their operations more easily and increase profitability. 

The U.S. economy has been expanding with rising consumer confidence and higher spending power. Economic output increased to the highest level in nearly three years this December. S&P Global's flash U.S. composite PMI, which captures activity in the services and manufacturing sectors, came in at 56.6 in December, up from 54.9 in August. Retail sales rose faster than expected in November, reflecting continued resilience in consumer spending and strong economic momentum. 

U.S. consumer sentiment increased for the fifth month in December. The sentiment index, according to the University of Michigan, increased to 74 in December from 71.8 last month. On the other hand, U.S. consumer confidence, as depicted by the Conference Board Consumer Confidence Index, tumbled in its largest month-over-month decline in December since November 2020 amid growing concerns about future business conditions.

Meanwhile, Bitcoin, the world's largest cryptocurrency, skyrocketed to a record $1,08,000 early in December on strong investor and institutional demand, Fed rate cuts, and Trump’s support for crypto. Trump has vowed to make the United States “the crypto capital of the planet.” However, Bitcoin plunged about 13% last week from its peak on Dec. 17.

ETFs in Focus

CoinShares Valkyrie Bitcoin Futures Leveraged Strategy ETF (BTFX) – Up 122.5%

CoinShares Valkyrie Bitcoin Futures Leveraged Strategy ETF offers leveraged exposure, aiming to deliver twice (2X or 200%) the daily performance of the S&P CME Bitcoin Futures Index Excess Return. This provides investors with a potent tool for capitalizing on daily market movements of Bitcoin futures. CoinShares Valkyrie Bitcoin Futures Leveraged Strategy ETF trades in a good average daily volume of about 51,000 shares and has accumulated $35.5 million in its asset base. It charges 1.85% in annual fees.  

Direxion Daily Dow Jones Internet Bull 3X Shares (WEBL) – Up 59%

Direxion Daily Dow Jones Internet Bull 3X Shares provides three times (3X or 300%) leveraged play on the Internet corner of the broad technology sector by tracking the Dow Jones Internet Composite Index. It has attracted $174.3 million in its asset base and charges 95 bps in annual fees. The product sees an average daily volume of 348,000 shares.

Direxion Daily Consumer Discretionary Bull 3X Shares (WANT) – Up 49.3%

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 AUM of $34.5 million and an average daily volume of 39,000 shares.

Direxion Daily Cloud Computing Bull 2X Shares (CLDL) – Up 48.8%

Direxion Daily Cloud Computing Bull 2X Shares offers two times leveraged exposure to the Indxx USA Cloud Computing Index. The product has accumulated $8.3 million in its asset base while charging 95 bps in fees per year. It exchanges around 27,000 shares a day on average.

BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU) – Up 47.6%

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 721,000 shares. It has accumulated $7.7 billion 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.

Still, for ETF investors bullish on these sectors 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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