5 Leveraged and Inverse ETFs That Thrived in March

March was a turbulent month for the U.S. stock market, driven by trade uncertainties under the new administration, rising inflation concerns, and signs of an slowing economy. Additionally, escalating geopolitical tensions further weighed on market sentiments.

The S&P 500 index fell into correction territory, showing a 10% decline from its peak in February, as of March 18. As the month drew to a close, the index registered a drop of 4.1%. Meanwhile, the Nasdaq Composite Index fell by 5% and the Dow Jones Industrial Average posted a loss of 3.2%.

In such an unpredictable market environment, there has been growing interest in leveraged and inverse-leveraged ETFs. These investment vehicles often provide significant returns when the market shifts quickly. Below are some of the standout leveraged and inverse-leveraged ETFs for March:

MicroSectors Gold Miners 3X Leveraged ETN (GDXU) – Up 28.6%

The MicroSectors Gold Miners 3X Leveraged ETN aims to deliver three times (300%) the performance of the S-Network MicroSectors Gold Miners Index. With an asset base of approximately $466.6 million and an annual fee of 95 basis points, this ETF trades an average of 624,000 shares daily.

MicroSectors Travel -3X Inverse Leveraged ETN (FLYD) – Up 26.8%

This ETF offers three times inverse exposure to the performance of the MerQube MicroSectors U.S. Travel Index, which encompasses significant U.S. companies involved in travel and tourism. It holds around $1.4 million in assets and also charges a fee of 95 basis points per year, with an average daily trade volume of about 5,000 shares.

Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN) – Up 19.2%

The Direxion Daily Aerospace & Defense Bull 3X Shares creates a leveraged long position three times stronger on the Dow Jones U.S. Select Aerospace & Defense Index. This fund charges an annual fee of 92 basis points and shows an average daily volume of 185,000 shares, with $175 million in assets under management.

Direxion Daily Technology Bear 3X Shares (TECS) – Up 13.9%

This ETF provides three times inverse exposure to the Technology Select Sector Index's daily performance. Accumulating approximately $75.8 million in assets, it charges 91 basis points in fees and sees about 853,000 shares traded on average daily.

ProShares UltraPro Short QQQ (SQQQ) – Up 13.7%

The ProShares UltraPro Short QQQ offers three times inverse exposure to the performance of the Nasdaq-100 Index. This ETF, which assesses the performance of the largest non-financial companies on the Nasdaq, boasts total assets of $2.2 billion and an average trading volume of 63 million shares, with an annual fee of 95 basis points.

As market uncertainty continues, investors keep turning to leveraged and inverse ETFs. These funds leverage various financial instruments like swaps, options, and futures contracts to achieve their objectives and can create significant gains if market trends are favorable.

Recent surveys and sentiment analyses indicate a general pessimism surrounding the economy. According to a recent BofA survey, optimism among money managers quickly diminished in March, marking the second-largest drop in global growth expectations since the survey's inception in 1994.

Gold and defense stocks are currently drawing attention, with elevated safe-haven demand driving gold prices up. Gold miners tend to excel in bull markets due to their operational leverage; even slight price increases can substantially enhance their profits. Furthermore, defense companies are performing well this year, driven by a surge in military spending from European nations.

ETFs, Investment, Market