8 High-Flying Leveraged ETFs YTD

Wall Street has been on a bull run so far this year with some wild swings lately. The U.S. stock market was caught in a web of worries in recent months triggered by the escalation in U.S.-China trade conflict, recession fears as indicated by the bond market and geopolitical tensions.

However, rising hopes of easing money policies globally as well as trade optimism continued to drive the stock market higher. The Fed has cut interest rates for the first time in more than a decade and is expected to do so further this month. Market expectations of a 25 basis-point rate cut are at 91.2% per the CME Group’s FedWatch tool. Lower interest rates will keep borrowing costs down, thereby resulting in higher consumer spending and an upswing in economic activities.

Last week, China’s central bank trimmed its reserve requirements for the seventh time since the start of 2018, reducing the amount of cash that banks are mandated to keep on reserve and thus freeing up as much as 900 billion yuan ($126 billion) in liquidity. The European Central Bank (ECB) is also expected to deploy further stimulus to shore up the 19-member eurozone economy, citing persistent low inflation and sluggish growth. Market participants are speculating that the ECB will cut its interest rate on bank overnight deposits for the first time since 2016 when it meets on Sep 12.

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.

Below we highlighted eight leveraged equity ETFs that piled up more than 70% returns in the year-to-date time frame. These funds will continue to be investors’ darlings provided the sentiments remain bullish.

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