5 Best-Leveraged ETFs Of The Second Quarter

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Wall Street ended the second quarter on a high note amid bouts of volatility triggered by rising inflation. The S&P 500 and the Dow Jones are up 8.1% and 3.4%, respectively, for the quarter while Nasdaq Composite Index outperformed with 11.2% gains.

The rally was driven by optimism surrounding the economic recovery. With millions of Americans fully vaccinated, and business and economy opening up, consumer confidence has risen, resulting in speedy economic recovery. Notably, U.S. consumer confidence jumped to a fresh pandemic high in June while a measure of U.S. factory activity climbed to a record high, bolstering economists' expectations of double-digit growth in the second quarter.

Additionally, an expanded stimulus, a huge infrastructure package, signs of job growth, and strong corporate earnings are acting as strong catalysts for the stocks. Further, tech stocks, which were badly hit by inflation fears, also roared back, rekindling investors’ interest in the growth ones.

The Fed views inflation as temporary. The latest personal consumption expenditures data shows that underlying inflation rose less than expected in May, easing worries about the sudden tapering in stimulus. The University of Michigan consumer survey’s one-year inflation expectation also dropped to 4.2% in June from a decade-high 4.6% in May while the five-to-10-year inflation expectation fell to 2.8% this month from 3.0% in May.

All this has resulted in huge demand for leveraged ETFs as investors seek to register big gains in a short span. Leveraged funds provide multiple exposure (2X or 3X) to the daily performance of the underlying index by employing various investment strategies such as swaps, futures contracts, and other derivative instruments. Due to their compounding effect, investors can enjoy higher returns in a very short period of time, provided the trend remains positive.

Below we highlight the five best-performing leveraged equity ETFs from different corners of the market that piled up huge gains in the second quarter. These funds will continue to be investors’ darlings, provided the sentiments remain bullish.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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