In the aftermath of the 2024 US presidential election, financial markets are preparing for a second Trump administration and, with it, the potential for a host of new financial policies, regulations and other decisions that could impact the economy. It’s too early to predict the exact nature of these changes, but the market as a whole has moved higher since the election, with the S&P 500 up about 3.2% since that day.
With investors generally optimistic about the economy looking ahead to 2025, the new administration may consider using one or more exchange-traded funds (ETFs) to gain exposure to a basket of stocks. A broad-based fund focused on the S&P or another major index will provide diversification and exposure to multiple sectors, a beneficial position if the overall economy improves.
Those investors who are particularly optimistic about what the short-term future may hold may even consider a leveraged fund. Most leveraged ETFs are designed to provide multiples of the daily returns of a particular index or group of stocks, but they are designed to be bought and sold within the same day.
Direxion Daily S&P 500 Bull 3X Stocks: Leverage and Liquidity
Direxion Daily S&P 500 Bull 3X today
Direxion Daily S&P 500 Bull 3X
(As of 11/29/2024 ET)
- 52 week range
- $90.53
▼
$185.44
- Dividend yield
- 0.11%
- Assets under management
- $5.72 billion
Direxion Daily S&P 500 Bull 3X Stocks NYSEARCA:SPXL provides bullish traders with exposure to 3x daily long leverage on the S&P 500. This makes the fund an excellent choice for investors who are more optimistic about the overall market in the short term.
SPXL offers a solid asset base of $5.5 billion and an average monthly trading volume of just under 3,000,000, so liquidity shouldn’t be much of a concern. An expense ratio of 0.91% typically equates to funds with leverage greater than 3x, although cheaper options exist. However, if investors trade this ETF during periods of S&P growth, the outsized return should help make the slightly higher fee more palatable.
Direxion Stock Daily Financial Bull 3X: Leverage in a Fast-Growing Sector
Direxion Daily Financial Bull 3X Stock Today
Direxion Daily Financial Bull 3X Stock
(As of 11/29/2024 ET)
- 52 week range
- $69.42
▼
$184.88
- Dividend yield
- 0.73%
- Assets under management
- $2.94 billion
Direxion Daily Financial Bull 3X Stock NYSEARCA: FAS is an ETF that offers a more targeted approach than SPXL described above. This fund tracks the Russell 1000 Financial Services Index, which includes just under 75 of the leading U.S. financial services companies. The index has risen more than 8% over the past month on expectations that looser regulation could benefit the sector.
As with SPXL above, investors are paying a premium for 3x exposure to this group of stocks, and the expense ratio is 0.94%. Although AUM and trading volumes are lower than SPXL, the fund continues to enjoy strong investor interest and trading activity.
MAX S&P 500 ETN with 4x Leverage: A High-Risk Long Leverage Play
MAX S&P 500 4x Leveraged ETN Today
MAX S&P 500 4x Leveraged ETN
(As of 11/29/2024 ET)
- 52 week range
- $24.46
▼
$53.66
An even more bullish option for the S&P 500 is the MAX S&P 500 ETN with 4x leverage. NYSEARCA:SPYUgiving investors 4x daily long leverage on the index. At this level of leverage, the level of risk is significant, but so is the potential for significant profit.
SPYU’s access to high leverage also comes at a fairly high cost. This fund’s expense ratio is 2.95%, which is significantly higher than the other two funds on this list. It is also a very niche fund, with a much lower AUM of just under $179 million, and an average monthly volume of 737,000. All this means that SPYU should be intended for very risk-tolerant and knowledgeable investors.
Other Options for Bullish Investors
Each of the funds listed above is a leveraged play designed for short-term trading, so investors typically do not buy or hold these ETFs for long periods of time. Indeed, investors who hold these funds longer than planned will face challenges related to total returns that no longer accurately reflect the funds’ performance targets. Those who want to invest and forget about it can instead choose a fund designed with this buy-and-hold strategy in mind.
Likewise, while leveraged funds offer the potential for multiple positive returns, they can also magnify losses. This makes these funds suitable for investors who fully understand the risks and potential rewards. Investors who think the S&P 500 is likely to rise in the new year but aren’t interested or willing to take on the risk of leverage may want to look at more traditional funds like the SPDR S&P 500 ETF Trust. NYSEARCA: SPYwhich gives access to the index without the additional component of leverage.
Before you consider the 4x MAX S&P 500 Leveraged ETN, you should hear this.
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