Bulls Roar Again In June: Leveraged ETFs In Focus

After being beaten down badly in May, the bulls came roaring again this month on hopes of an easier monetary policy. In fact, the Dow Jones and S&P 500 witnessed their best weekly gain since late November, rising 4.7% and 4.4%, respectively, while Nasdaq saw its best performance since the week ended Dec 28, inching up 3.9%.

The Fed has signaled to cut interest rates if needed and is closely monitoring the implications of the trade tensions on the economy. The latest weak job data has also stirred speculation on interest rate cuts, thereby boosting the appeal of riskier assets.

Lower rates would make borrowings cheaper, providing a boost to both investment in new projects and repayment of higher-rate debt. As such, it would lead to strong economic growth and is thus a boon for the stock market. Further, President Donald Trump suspended the planned tariffs against Mexico that drove the bulls. A slew of mergers and acquisitions is also adding to the strength.

However, looming U.S.-China trade dispute and global growth concerns continue to weigh on the stocks. Per the latest reports, President Donald Trump will raise tariffs on further Chinese imports if the two countries don’t reach a deal at a meeting of Group of 20 leaders later this month.

While volatility and uncertainty prevail, rate cuts hope has resulted in 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 a friend.

Below we have highlighted six leveraged ETFs that have gained in double digits this month and should continue to do so at least for the near term if the sentiments remain intact.

Direxion Daily Semiconductor Bull 3x Shares (SOXL - Free Report) – Up 30.1%

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