Wall Street wrapped up the month of July with strong gains buoyed by better-than-expected earnings, receding inflation pressure, rounds of upbeat economic data and hopes of a soft landing for a resilient U.S. economy.
The S&P 500 gained 3.1%, capping its fifth consecutive positive month, a streak not seen since the seven-month period ending August 2021. The tech-heavy Nasdaq Composite Index also logged its fifth consecutive winning month, rising 4%. Meanwhile, the Dow Jones was an outperformer for most of the month, with a 13-day advance last week, matching the index’s longest streak of gains. The blue-chip index was up 3.3% in July.
This has resulted in huge demand for leveraged ETFs as investors sought to register big gains in a short span. We highlight a bunch of the best-performing leveraged equity ETFs from different corners of the market that gained more than 30% in July. These include Direxion Daily Electric and Autonomous Vehicles Bull 2X Shares EVAV, Direxion Daily Regional Banks Bull 3x Shares DPST, GraniteShares 1.5x Long COIN Daily ETF CONL, GraniteShares 1.75x Long BABA Daily ETF BABX and MicroSectors U.S. Big Oil Index 3X Leveraged ETN NRGU. These funds will continue to be investors’ darlings, at least in the near term, provided the sentiments remain bullish.
Inflation cooled down for the 12th consecutive month in June. This will likely push the Fed closer to ending its fastest interest rate hiking cycle since the 1980s. But the Fed, in its latest meeting, raised interest rates by a quarter-percentage point to the highest level since March 2001. This marked the 11th rate increase in more than a year.
Improving economic indicators, such as strong job numbers, rising consumer spending and robust manufacturing activity, drove the stocks higher. The American economy surprisingly picked up steam in the second quarter, with GDP growing 2.4% annually from 2% growth in the first quarter. This is especially thanks to resilience among consumers and businesses in the face of high interest rates.
Moreover, the picture emerging from the Q2 earnings season is one of continued resilience and strength, with an above-average proportion of companies not only beating estimates but also providing reassuring guidance for the coming periods. Per the latest Earnings Trends, the companies that have reported results so far are up 3.1% on 6.9% higher revenues, with 81.5% beating EPS estimates and 63.6% beating revenue estimates.
We have profiled the ETFs in detail below:
Direxion Daily Electric and Autonomous Vehicles Bull 2X Shares (EVAV) – Up 78.3%
Direxion Daily Electric and Autonomous Vehicles Bull 2X Shares seeks to track two times the performance of the Indxx US Electric and Autonomous Vehicles Index. It has accumulated $11.1 million in its asset base. Direxion Daily Electric and Autonomous Vehicles Bull 2X Shares charges 95 bps in annual fees and trades in an average daily volume of 9,000 shares.
Direxion Daily Regional Banks Bull 3x Shares (DPST) – Up 58.5%
Direxion Daily Regional Banks Bull 3x Shares seeks to deliver thrice the returns of the S&P Regional Banks Select Industry Index, charging 89 bps in fees per year. DPST has accumulated $687.2 million in its asset base and trades in a moderate volume of around 1.8 million shares a day on average.
GraniteShares 1.5x Long COIN Daily ETF (CONL) – 53.4%
GraniteShares 1.5x Long COIN Daily ETF seeks 1.5 times (150%) the daily percentage change of the common stock of Coinbase Global Inc (COIN). It has accumulated $1.5 million in its asset base while trading in an average daily volume of 416,000 shares. GraniteShares 1.5x Long COIN Daily ETF trades in an average daily volume of 416,000 shares.
GraniteShares 1.75x Long BABA Daily ETF (BABX) – Up 39.6%
GraniteShares 1.75x Long BABA Daily ETF seeks 1.75 times (175%) the daily percentage change of the common stock of Alibaba Group (BABA), charging 1.15% in annual fees. It trades in an average daily volume of 64,000 shares and has gathered $7 million in its asset base.
MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU) – Up 34.1%
MicroSectors U.S. Big Oil Index 3X Leveraged ETN provides three times leveraged exposure to the Solactive MicroSectors U.S. Big Oil Index, which is equal-dollar weighted and provides exposure to the 10 largest U.S. energy and oil companies. MicroSectors U.S. Big Oil Index 3X Leveraged ETN has been able to manage $1.6 billion in its asset base while trading in an average daily volume of 82,000 shares. The expense ratio comes in at 0.95%.
Bottom Line
As a caveat, investors should note that these products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures.
Still, for ETF investors bullish on U.S. stocks for the near term, either of the above products can be an interesting choice. Clearly, a near-term long could be intriguing for those with high-risk tolerance and a belief that the trend is a friend in this corner of the investing world.
Direxion Daily Regional Banks Bull 3X Shares (DPST): ETF Research Reports
MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU): ETF Research Reports
GraniteShares 1.5x Long COIN Daily ETF (CONL): ETF Research Reports
Direxion Daily Electric and Autonomous Vehicles Bull 2X Shares (EVAV): ETF Research Reports
GraniteShares 1.75x Long BABA Daily ETF (BABX): ETF Research Reports
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