Leveraged ETFs That Soared More Than 50% In February

The U.S. stock market continued its strong rally in February with all three main indices gaining at least 3%, representing their second straight monthly gains. In fact, the back-to-back months of strong rally represents the best start to year since 1987. Optimism over U.S.-China trade deal has been the biggest catalyst.

The Federal Reserve also played an important role in driving market sentiments. The central bank said that it will be patient in raising rates, citing mounting risks to the U.S. economy, including slowdown in Chinese and European economies and waning stimulus from the 2018 tax cuts. Lower interest rates will keep the borrowing cost lower, thereby resulting in higher consumer spending and thus stepped-up economic activities.

Aside from American markets, China stocks are worth noting as the major indices raged to a bull market last month after President Donald Trump delayed his plan for raising tariff on $200 billion worth of Chinese goods. In fact, Chinese stocks have seen the world’s best trade in February.

The stimulus and a wide range of reforms implemented by the Chinese government to revitalize its economic growth raised the appeal for these stocks since the start of the year. Further, MSCI’s move to quadruple the weighting of Chinese big caps (A-shares) for a number of its indexes led to immense confidence in the Chinese stock market.

All these fundamentals have 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 some leveraged equity ETFs that have piled up more than 50% returns in February. These funds will continue to be investors’ darlings provided the sentiments remain the same.

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