Markets

Top-Performing Leveraged ETFs of This Year So Far

The year 2020 has been marked by the outbreak of the SARS (severe acute respiratory syndrome)-like coronavirus in late January. Due to the rapid spread of the virus, Wall Street snapped its longest bull run ever in March and went on to record its worst quarter since fourth-quarter 2008 (read: Top ETF Stories of First Quarter).

The resultant lockdowns which fell mainly in the second quarter weighed heavily on global economies. Many economies went into recession. In fact, the second quarter witnessed the historic event of negative oil price in April due to higher supplies, poor demand and a shortage of storage. Although economies started reporting upbeat economic data points with the lifting of lockdowns, fears of more waves of the contagion became rife.

Meanwhile, global central banks and governments launched a trillion-dollar stimulus in the first half. As a result, global stocks started rallying from Q2 and maintained the uptrend till August. The S&P 500, in fact, enjoyed the best August in 34 years, as investors rotated into the beaten-down segments of the year, namely the cyclicals, on vaccine hopes.

However, the rally faltered in early September on profit booking in some high-flying tech stocks (the ones which have been coronavirus beneficiaries) as well as a sudden emergence of doubts over the faster rollouts of vaccine by some pharma majors.

Overall, among the big three U.S. equity indexes, the tech-heavy Nasdaq is still a winner with 24.7% gains this year, followed by the S&P 500 (up 5.3%) and the Dow Jones (down 1.9%) (as of Sep 15, 2020). Below we highlight the winning leveraged ETFs of the year so far.

MicroSectors FANG+ Index 3X Leveraged ETN (FNGU) – Up 210%

The underlying NYSE FANG+ index includes 10 highly liquid stocks that represent a segment of the technology and consumer discretionary sectors consisting of highly-traded growth stocks of technology and tech-enabled companies.

The Internet and the broader tech space have been performing well this year. Notably, social distancing triggered by the coronavirus outbreak has benefited communications and activities over Internet in recent months. Cloud computing has been another hot space because of its rising usage in the work-learn-and-entertainment-from-home activities (read: ETFs in Focus on Tug of War Between Bulls and Bears).

ProShares Ultra Silver AGQ – Up 84.3%

The underlying Bloomberg Silver Subindex is intended to reflect the performance of silver as measured by the price of COMEX silver futures contracts. Silver has been on a stellar ride this year with prices climbing to the highest level in nearly seven years lately. Increase in investment demand, pickup in industrial activity due to factory reopening after lockdowns, and investors’ appetite for alternatives to the safe-haven asset gold (which became pretty pricey after an early-year rally) led to the outperformance.

Unlike gold, silver has considerable presence in the industrial sector. About 50% of the metal’s total demand comes from industrial applications. So, the reopening of global economies is helping silver more than the yellow metal.

Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares GUSH – Up 78.6%

The underlying S&P Oil & Gas Exploration & Production Select Industry Index includes domestic companies from the oil and gas exploration and production sub-industry. The fund is a new entrée. It hit the market on Apr 1 and benefited from the post-lockdown jump in oil prices (read: Most Successful ETF Launches of Second Quarter).

Direxion Daily CSI China Internet Bull 2X Shares CWEB – Up 79.4%

The underlying CSI Overseas China Internet Index includes securities primarily listed outside of China, but are meeting one of the three following criteria: the company is incorporated in mainland China; the operation center for the company is in mainland China; or at least 50% of the revenue from the company is from mainland China.

The fund is another tech winner of the year as it gives exposure to Chinese versions of stay-at-home stocks ranging from e-commerce, search engines, providers of IT services and educational content.

DB Gold Double Long ETN (DGP– Up 58.6%

The Deutsche Bank Liquid Commodity Index-Optimum Yield Gold tracks the long or short performance of a single unfunded gold futures contract. A super-dovish Fed and the resultant decline in the strength of the greenback, fears of prolonged global recession, subdued oil prices, strong safe-haven demand amid bear market rallies booted gold bullion for the most part of this year.

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ProShares Ultra Silver (AGQ): ETF Research Reports

DB Gold Double Long ETN (DGP): ETF Research Reports

Direxion Daily SP Oil Gas Exp. Prod. Bull 2X Shares (GUSH): ETF Research Reports

Direxion Daily CSI China Internet Index Bull 2X Shares (CWEB): ETF Research Reports

MicroSectors FANG Index 3X Leveraged ETN (FNGU): 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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