In the period following the U.S. presidential election of 2024, 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 likely to impact the economy. It remains early to predict the exact nature of these changes, but the market has generally moved upward since the date of the election, with the S&P 500 climbing about 3.2% since that day.
Investors who are generally bullish about the economy are looking ahead into 2025, and the new administration may consider one or more exchange-traded funds (ETFs) to access a basket of equities. A broad-based fund focused on the S&P or another major index will provide diversification and exposure across multiple sectors, a beneficial position to hold if the overall economy improves.
Those investors particularly optimistic about what the short-term future may hold might even consider a leveraged fund. Most leveraged ETFs are designed to provide a multiple of the daily performance of a given index or group of stocks, but they are intended to be bought and sold within the span of a single day.
Direxion Daily S&P 500 Bull 3X Shares: Leverage and Liquidity
The Direxion Daily S&P 500 Bull 3X Shares (NYSEARCA: SPXL) provides bullish traders the opportunity to access 3x daily long leverage to the S&P 500. This makes the fund an excellent choice for investors widely optimistic about the overall market over the short term.
SPXL offers a solid asset base of $5.5 billion and a one-month average trading volume of just under 3,000,000, so liquidity should not be much of a concern. Its expense ratio of 0.91% is generally in line with over 3x leveraged funds, although cheaper options exist. However, if investors trade this ETF during periods in which the S&P increases, the outsized returns should help make a slightly higher fee more palatable.
Direxion Daily Financial Bull 3X Shares: Leveraged Exposure to High-Flying Sector
The Direxion Daily Financial Bull 3X Shares (NYSEARCA: FAS) is an ETF offering a more targeted approach than SPXL above. This fund focuses on the Russell 1000 Financial Services Index, holding just under 75 of the leading financial companies in the U.S. This index has climbed by more than 8% in the past month on an expectation that looser regulations could benefit the sector.
As is the case for SPXL above, investors pay a premium for 3x exposure to this group of stocks, and the expense ratio is 0.94%. While AUM and trading volumes are lower than SPXL, the fund still has solid investor interest and trading activity.
MAX S&P 500 4X Leveraged ETN: High-Risk Long Leverage Play
An even more bullish play on the S&P 500 is the MAX S&P 500 4X Leveraged ETN (NYSEARCA: SPYU), which gives investors 4x daily long leverage to the index. At this level of leverage, the risk level is considerable, but so too is the potential for significant gains.
SPYU's high-leverage access also comes with an appropriately high cost. The expense ratio for this fund is 2.95%, considerably higher than the other two funds in this list. It is also a highly niche fund with a much lower AUM level of just under $179 million and a one-month average volume of 737,000. All of this means that SPYU should be reserved for very risk-tolerant and knowledgeable investors.
Other Options for Bullish Investors
Each of the above funds is a leveraged play designed for short-term trading, so investors generally do not buy and hold these ETFs for an extended period of time. Indeed, investors holding on to these funds for more than the intended duration will face issues with compounding returns that no longer accurately reflect the performance goals of the funds. Those looking to set an investment and forget about it might instead choose a fund designed with this buy-and-hold strategy in mind.
Similarly, while leveraged funds offer the opportunity to multiple positive returns, they can also amplify losses as well. This makes these funds suitable for investors who thoroughly understand the risks and potential rewards. Investors believing the S&P 500 is likely to climb into the new year but not interested in or willing to take on the risk of leverage might look to more traditional funds like the SPDR S&P 500 ETF Trust (NYSEARCA: SPY), which gives access to the index without the added leverage component.
