5 Best Leveraged ETFs of Q4

The fourth quarter of 2024 has been volatile for the U.S. stock market. After a subdued October, November turned out to be the strongest month of the year, driven by the post-election rally following President-elect Donald Trump’s victory. The gains extended in early December on the resurgence of tech stocks.

The Dow Jones Industrial Average crossed the 45,000 milestone for the first time, while the S&P 500 touched nearly 6,100. Meanwhile, the tech-heavy index topped the 20,000 milestone for the first time. However, the superb rally faltered mid-month due to the Fed’s less dovish stance. 

This resulted in a huge demand for leveraged ETFs as investors look to register big gains in a short span. We have highlighted a bunch of the best-performing leveraged ETFs that led the way in the fourth quarter. These include CoinShares Valkyrie Bitcoin Futures Leveraged Strategy ETF BTFX, Direxion Daily Dow Jones Internet Bull 3X Shares WEBL, Direxion Daily Consumer Discretionary Bull 3X Shares WANT, Direxion Daily Cloud Computing Bull 2X Shares CLDL and BMO REX MicroSectors FANG+ Index 3X Leveraged ETN FNGU. 

These funds seek to register big gains in a short span and will continue their strong trend, at least in the near term, provided the sentiments remain bullish. Leveraged ETFs provide multiple exposures (2X or 3X) to the daily performance of the underlying index. These funds employ various investment strategies, such as the use of swaps, futures contracts and other derivative instruments to accomplish their objectives.

Wall Street remains optimistic about the incoming administration’s economic agenda. Though Trump’s policies on restricting illegal immigration, enacting new tariffs, lowering taxes and reducing regulations will accelerate inflation, limiting the Federal Reserve’s ability to cut rates, they will likely boost the economy. Additionally, the AI boom will continue to fuel a rally in the stock market. 

Though the Fed is cautious about future rate cuts, projecting fewer rate cuts than previously expected, it has slashed interest rates three times in the past three months, bringing down the benchmark rate to 4.25-4.50%. Lower interest rates lead to reduced borrowing costs that help businesses expand their operations more easily and increase profitability (read: Wall Street Dives on Less Dovish Fed: 5 ETF Zones That Win). 

The U.S. economy has been expanding with rising consumer confidence and higher spending power. Economic output increased to the highest level in nearly three years this December. S&P Global’s flash U.S. composite PMI, which captures activity in the services and manufacturing sectors, came in at 56.6 in December, up from 54.9 in August. Retail sales rose faster than expected in November, reflecting continued resilience in consumer spending and strong economic momentum. 

U.S. consumer sentiment increased for the fifth month in December. The sentiment index, according to the University of Michigan, increased to 74 in December from 71.8 last month. On the other hand, U.S. consumer confidence, as depicted by the Conference Board Consumer Confidence Index, tumbled in its largest month-over-month decline in December since November 2020 amid growing concerns about future business conditions.

Meanwhile, Bitcoin, the world’s largest cryptocurrency, skyrocketed to a record $1,08,000 early in December on strong investor and institutional demand, Fed rate cuts, and Trump’s support for crypto. Trump has vowed to make the United States “the crypto capital of the planet.” However, Bitcoin plunged about 13% last week from its peak on Dec. 17.

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