U.S. stocks have seen a rally since the news of the upcoming U.S.-China conciliatory summit hit the market. So far, stocks have been battered by fears of a trade war ever since President Trump started slapping tariffs against a host of countries (mainly China).
Now, the signs of negotiations between the United States and China have triggered a market rally. The S&P notched a new intraday record on Aug 21. The Dow Jones Industrial Average too benefited a great deal on the prospect of the U.S.-China trade truce. The Dow Jones added about 0.3% and the S&P 500 advanced around 0.2% on Aug 21 (read: Dow Springs Back: More Upside for ETFs? ).
Apart from hopes on the trade front, the recent weakness in the greenback probably has boosted large-caps. In any case, the U.S. dollar has been in the spotlight since before the presidential election.
Trump is a " low interest rate person ." Concerned about the U.S. economy's $19 trillion of debt, Trump wants to keep the interest rate low so that the country does not have to bear huge interest payments. In this regard, Trump recently commented that he was " not thrilled " with the Fed policy tightening.
If that wasn't enough, Trump is expected to push for currency wars against key trading partners of the United States. Agreed, his mode of war was supposed to be via tariffs, but a lower greenback route wasn't completely brushed off (read: A Tale of Two Currencies and The ETF Impact ).
Meanwhile, despite a weaker dollar, small caps surprisingly bounced back with the Russell 2000 hitting a record high on Aug 21. The index gained more than 1.1% on the day. Economic wellbeing in the domestic land is a major positive for small-cap stocks.
The reading of the U.S. GDP for the second quarter of 2018 advanced at a 4.1% annual rate of growth (the best clip in nearly four years), higher than 2.2% expansion in the previous period and in line with market expectations. The labor market is steady and retail sales have been in great shape in the United States. The tax reform is yet another boon for the U.S. stocks. Corporate earnings have been in great shape as well.
Leveraged ETFs in Focus
Thanks to this optimism, investors can play the below-mentioned leveraged ETFs in the near term. Leveraged funds provide multiple exposure (i.e. 2x or 3x) to the daily performance of the underlying index. These are likely to stay strong as long as there isn't any fallout in the U.S.-China trade meet.
Direxion Daily Small Cap Bull 3X Shares TNA - 3.4% on Aug 21
ProShares UltraPro Russell 2000 URTY - 3.4% on Aug 21
ProShares Ultra SmallCap600 SAA - Up 2.2% on Aug 21
ProShares Ultra Russell2000 UWM - Up 2.3% on Aug 21
Ultra S&P500 ETF SSO - Up 0.4% on Aug 21
UltraPro S&P 500 ETF UPRO - Up 0.6% on Aug 21
Direxion Daily S&P 500 Bull 3x Shares ETF SPXL - Up 0.6% on Aug 21
Dow Jones Industrial Average
ProShares UltraPro Dow30 UDOW - Up 0.8% on Aug 21
ProShares UltraPro QQQ TQQQ - Up 1.03% on Aug 21
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