Best Leveraged ETF Areas of Last Week

7:00 am ET September 18, 2023 (Zacks) Print

Wall Street delivered mixed-to-downbeat performances last week due to rising rates. The S&P 500 (down 0.2%), the Nasdaq (down 0.4%) and the Russell 2000 (down 0.2%) slumped last week while the Dow Jones (up 0.1%) added slight gains.

Worries over longer-than-expected higher interest rates have been playing foul on the stock market in recent weeks. The series of upbeat economic data as well as the latest warning from the Fed officials revived speculation that the Fed could lift interest rates again, if not in September.

A Recap of Corporate News

Among key corporate events, at its annual California launch event, Apple AAPL revealed a suite of devices. The event took an unexpected turn in terms of pricing, with Apple maintaining its price range for most products, the notable exception being iPhone Max (read: Apple ETFs in Focus Post iPhone 15 Launch).

British chipmaker Arm Holdings Plc made a strong debut on Nasdaq under the symbol (ARM) on Thursday. The stock soared as much as 21% on the first day, pushing the market cap to more than $65 billion. The company raised $4.87 billion in its initial public offering (read: Can Blockbuster Arm IPO Boost Semiconductor ETFs?).

A Recap of New Economic Data

The annual inflation rate in the United States accelerated for a second straight month to 3.7% in August from 3.2% in July, above market forecasts of 3.6%. Oil prices have been on the rise in the previous two months, which has been held responsible for the high price inflation. Core inflation rate however, which excludes food and energy, slowed for the fifth month to 4.3%, in line with market expectations (read: 5 Sector ETFs to Fight Sticky Inflation).

Sales at U.S. retailers increased 0.6% in August from July, way more than analysts’ estimate of a meager rise of 0.1%. Retail sales grew last month at a slightly faster pace than July’s revised reading of a gain of 0.5% and marked the fifth successive monthly increase in sales at retail outlets. Last month, retail sales increased 2.5% year over year.

In an attempt to tame rising consumer prices, the European Central Bank (ECB) has opted to increase interest rates to an unprecedented level. However, the euro's value declined on Sep 14, 2023 after the central bank hinted at the conclusion of its policy tightening due to economic slowdown (read: Time to Tap Eurozone ETFs as Rate-Hike Cycle Nearing End?).

Against this backdrop, below we highlight a few winning leveraged ETFs of last week.

ETFs in Focus

Leveraged Tesla

GraniteShares 1.75x Long TSLA Daily ETF (TSLR) – Up 17.9%

Direxion Daily TSLA Bull 1.5X Shares ETF (TSLL) – Up 15.5%

Tesla has been gaining in share price due to back-to-back constructive developmental news. There was a news last week that Morgan Stanley analyst, Adam Jonas, said that the supercomputer used to train AI models for automatic cars could give Tesla the world’s largest electric vehicle (EV) manufacturer, an “asymmetric advantage”, resulting in 76% growth in market value, as quoted on Reuters. Then there was a news in the middle of the week that Tesla has combined several innovations in halving production costs (read: Manufacturing Advancements to Boost Tesla: ETFs in Focus).

Leveraged Gold Miners

MicroSectors Gold Miners 3X Leveraged ETN (GDXU) – Up 14.6%

Direxion Daily Junior Gold Miners Index Bull 2x Shares (JNUG) – Up 10.2%

Gold prices added about 1% last week. Since mining companies, often act as a leveraged play of the underlying metal, gold mining ETFs like GDXU and JNUG surged last week.

Leveraged Marijuana

AdvisorShares MSOS 2x Daily ETF (MSOX) – Up 13.1%

In a significant development, the Department of Health and Human Services (HHS) has recently initiated a review of marijuana's classification under the Controlled Substances Act. This move has the potential to impact the burgeoning marijuana industry, which has faced federal restrictions despite state-level legalization efforts.

Since the 1970s, marijuana has been categorized as a Schedule I drug, alongside substances like heroin and LSD. But The Drug Enforcement Agency (DEA) will consider reclassifying marijuana as a Schedule III drug, placing it alongside substances like ketamine, anabolic steroids, and testosterone (read: Behind the Recent Surge in Marijuana ETFs).

Leveraged Brazil

ProShares Ultra MSCI Brazil Capped (UBR) – Up 11.3%

Direxion Daily MSCI Brazil Bull 2X Shares (BRZU) – Up 10.9%

The Brazilian GDP expanded by 0.9% in the second quarter of 2023, way higher than market expectations of a 0.3% growth rate. China’s industrial and retail indicators fared better in August, boosting hopes of resource purchases especially with recent cut in the PBoC’s reserve requirement ratio. Investors should note that China is Brazil’s largest trading partner. Not only this, Brazil’s central bank reduced its key Selic rate to 13.25% last month from 13.75%, after raising it to that level in August 2022. The market expects a 50-basis point cut in Selic next Wednesday to 12.75%.

Leveraged Utilities

Direxion Daily Utilities Bull 3X Shares (UTSL) – Up 7.9%

Although the current yield environment isn't favorable for the sector, its essential nature still provides substantial support to utilities sector. Historically, the second half of September through the first week of October has been a particularly challenging period to own stocks. Probably, this is why, investors binged on this safe sector last week. The valuation of the sector is also decent at 17.85X, in line with the S&P 500.

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