ETFs

Best Leveraged ETF Areas of Last Week

Last week was slightly downbeat for Wall Street on talks of a capital gain tax hike. The S&P 500 (down 0.13%), the Dow Jones (down 0.5%), the Nasdaq Composite (down 0.3%) – were all in the red last week but the Russell 2000 (up 0.4%) managed to stay in the green.

Decent U.S. economic data points released lately and subdued U.S. treasury yields drove market momentum last week, but talks of a capital gain tax hike caused some occasional selloffs too.As has been discussed for over a year, President Joe Biden is now likely to propose a plan to raise taxes on the richest Americans, including the largest-ever increase in levies on investment gains (read: What Holds for ETFs If Biden Hikes Capital Gain Tax?).

The proposed marginal 39.6% rate would be a substantial increase from the current rate of 20%, for those earning $1 million or more. Markets rebounded soon enough to close out the week probably on hopes that Biden’s proposal may face opposition from Centrist Democrats in Congress. But resistance from centrist Democrats might keep the actual capital gain tax rate well below 39.6%.

Against this backdrop, below we highlight a few ETF areas that topped last week.

China

China stocks benefited last week as president Xi Jinping's renewed pledge for green energy boosted the clean energy stocks while a global rise in coronavirus cases (especially in some Asian countries) aided healthcare shares. CSI 300 China A 2X Direxion CHAU (up 8.74%) was the key gainer in this arena.

Internet

Rising COVID-19 cases globally have probably been aiding the Internet stocks. Moreover, China’s tech stocks were sold off badly in early April due to an antitrust crackdown launched by the Chinese government. This called for a buying opportunity in those otherwise solid bets last week. CSI China Internet Index Bull 2X Direxion CWEB (up 8.16%) has emerged a winner.

Biotech

Biotech companies are apparently now the most-shorted U.S. stocks as tougher federal scrutiny will likely emerge. This has put the sector in an undervalued corner. Subdued treasury yields also brought back attention toward the growth sectors like biotech. Also, rising COVID-19 cases probably brightened the appeal for biotech stocks last week. S&P Biotech Bull 3X Direxion LABU (up 5.69%) was a key winner.Healthcare Bull 3X Direxion ETF Direxion CURE) added 3.2% last week.

Real Estate

The U.S. real estate market has been red-hot as a rising stock market and the consequent wealth effect has strengthened the spending power of the wealthy. This, in turn, has boosted the real estate values. Low inventories and higher demand have also boosted the property prices.

Cheap mortgage rate is another positive. Total mortgage application volume increased 8.6% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Real estate stocks’ higher dividend yield is another attractive point. Real Estate Bull 3X Direxion DRN (up 5.4%) was a prominent winner.

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DIRX-D SP BBULL (LABU): ETF Research Reports
 
DIR-D CII BL2X (CWEB): ETF Research Reports
 
DIR-D RE BULL3X (DRN): ETF Research Reports
 
DIRX-D CSI 300 (CHAU): ETF Research Reports
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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