5 Top-Performing Leveraged ETF Areas of Last Week
Last week for Wall Street was all about vaccine optimism marred somewhat by rising virus cases and fears of further lockdowns. As a result, the S&P 500 and the Dow Jones indexes lost about 0.8% and 0.7%, respectively, while the tech-heavy the Nasdaq was up about 0.2%.
Pfizer Inc. PFE and BioNTech SE BNTX came up with encouraging updates regarding their coronavirus vaccine candidate, BNT162b2, which reflects a vaccine efficacy rate of 95%. Before this, Moderna MRNA also said that its vaccine was over 94% effective in preventing the virus.
Apart from this, the global markets have been rejoicing in the possibility of a divided congress in the United States. A divided congress or balanced government means status quo. Some of Biden’s proposed policies (like tax hike) may not see an easy passage as chances of a balanced government are high.
Vaccine optimism (which indicates a sooner-than-expected return to economic normalcy) and a divided congress (which indicates the likely reiteration of the existing policy matters) mean a steady stock market. But steadily rising virus cases poured cold water on the great pharma breakthrough last week.
Against this backdrop, below we highlight a few leveraged ETF areas that gained the most last week.
Energy
The coronavirus-led global slowdown crippled oil demand. Due to the second wave of the virus attack, major parts of Europe like Germany, France and the U.K. are under lockdown now. In such a scenario, the vaccine news offered some optimism around the energy sector. Ultrashort Natural Gas Proshares KOLD (up 22.4%), S&P MLP Index ETN (MLPO) (up 19.8%) and Microsectors U.S. Big Oil Index 3X ETN (NRGU) gained 18% last week.
Retail
Retail sales data came in weaker than expected last week but still the fund Direxion Retail Bull 3X Shares RETL gained 17.09%. The fund’s underlying index has about 23% exposure to Internet & Direct Marketing Retail – a segment that probably received a lift from rising virus cases. Notably, online activities were hit amid the pandemic due to a no human contact mode of operation.
Cocoa
iPath Bloomberg Cocoa Subindex Total Return ETN NIB added about 16% last week. Cocoa prices jumped last week on tensions between cocoa-producing countries and manufacturers over costs. This happened despite falling demand in cocoa amid the pandemic.
Small Caps
Since small-cap stocks are more closely tied to the domestic economy, the latest hopes of a vaccine bode well for the segment. Principal U.S. Small-MidCap Multi-Factor Core Index ETF PSM was up 15.1% last week.
On Nov 19, Treasury Secretary Steven Mnuchin “asked the Federal Reserve to shut down five emergency COVID-19 relief facilities and return $455 billion of unused funds, a move opposed by Fed Chairman Jerome Powell.”
In March, Congress approved $2.2 trillion of emergency relief under the CARES Act, which included $500 billion to enact a variety of emergency lending facilities through the Fed and guarantee loans. Out of this, only a trivial portion of the funds — $25 billion — were used.
Now Mnuchin wants to discuss the stimulus package with Democrats, probably with that unused funds. This was a winning factor for small caps last week.
Business Development
Business Development Companies (BDCs) are firms that loan out to small- and mid-sized companies at relatively higher rates and often grab debt or equity stakes in those companies. BDCs dole out high cash payments and capture the equity performance of the borrower. These are high-yielding options. ETRACS 2xMonthly Leveraged Wells Fargo Diversified Business Development Company Index ETN Series B BDCY advanced 15% last week. The fund yields 21.77% annually.
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Pfizer Inc. (PFE) : Free Stock Analysis Report
Moderna, Inc. (MRNA) : Free Stock Analysis Report
Direxion Daily Retail Bull 3x Shares (RETL): ETF Research Reports
iPath Bloomberg Cocoa Subindex Total Return ETN (NIB): ETF Research Reports
ProShares UltraShort Bloomberg Natural Gas (KOLD): ETF Research Reports
BioNTech SE Sponsored ADR (BNTX) : Free Stock Analysis Report
Principal U.S. SmallMidCap MultiFactor Core Index ETF (PSM): ETF Research Reports
ETRACS 2x Mnthly Lvrgd Wells Fargo Dvrsfied BDC Indx ETN Srs B (BDCY): ETF Research Reports
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