6 Leveraged ETFs That Gained More Than 25% At Halfway Q1

Despite the ongoing coronavirus crisis, U.S. market bulls are marching higher with no signs of slowdown. This is especially true as China and central banks around the world are stepping up efforts to curtail the economic damage caused by the epidemic by injecting cash into markets, lower interest rates and other stimulus measures.

In particular, the People’s Bank of China injected $1.7 trillion yuan ($242.9 billion) into the economy early this month and unexpectedly lowered interest rates on reverse repurchase agreements by 10 basis points (bps). China is also widely expected to cut its benchmark lending interest rate this week, adding to measures for limiting the adverse impact of business shutdowns and travel curbs on the world’s second-largest economy.

Additionally, the latest minutes from the Fed’s last policy meeting, which shows the interest rates will remain unchanged in the near term, added to the optimism.  

Further, the initial U.S.-China trade deal and better-than-expected earnings are driving the stocks higher. Meanwhile, the U.S. economy has been resilient and could continue to grow moderately this year. The labor market was off to a strong start in 2020, creating 225,000 new jobs in January. The manufacturing sector, which had languished in contraction territory for five months, rebounded strongly in January while services sector activity also picked up, with industries reporting increase in new orders. Retail sales also strengthened for a fourth consecutive month and homebuilder sentiment is hovering near the highest level since 1999.

All these fundamentals have led to huge demand for leveraged ETFs as investors seek to register big gains in a short span. Leveraged funds provide multiple exposure (i.e. 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.

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