Market Overview

5 Donald Trump-Inspired Leveraged ETFs Make Their Debut

5 Donald Trump-Inspired Leveraged ETFs Make Their Debut

Direxion, one of the largest issuers of inverse and leveraged exchange traded funds, significantly increased its stable of such ETFs Wednesday with the debut of five new products. Several of Direxion's new leveraged ETFs are plays on sectors and industries believed to be beneficiaries of various political efforts by the Trump Administration.

“With the new administration in Washington comes new policies that have the potential to affect the capital markets landscape,” said Sylvia Jablonski, Managing Director at Direxion. “We aim to provide traders with ways to capitalize on opportunities created by those new policies.” 

A Defense Play 

On the back of President Trump's promise to bolster defense spending and the looming possibility of several geopolitical conflicts around the globe, aerospace and defense stocks and ETFs have been stellar performers since election day. That could be a sign the Direxion Daily Aerospace & Defense 3X Shares (NYSE: DFEN) is a well-timed addition to the Direxion lineup.

DFEN will attempt to deliver triple the daily returns of the Dow Jones U.S. Select Aerospace & Defense Index, which attempts to measure the performance of the aerospace and defense industry of the U.S. equity market. Top holdings in the index include Boeing Co (NYSE: BA) (9.5 percent), United Technologies Corporation (NYSE: UTX) (9.07 percent), Lockheed Martin Corporation (NYSE: LMT) (7.61 percent), General Dynamics Corporation (NYSE: GD) (6.93 percent) Raytheon Company (NYSE: RTN) (6.21 percent), and Northrup Grumman Corporation (NYSE: NOC) (6.07 percent). It also includes small exposures to the firearms and shipbuilding industries. 

Adding To The Broad Sector ETFs

Direxion also introduced several broad sector and industry-related funds. 

The Direxion Daily Industrials Bull 3X Shares (NYSE: DUSL). DUSL will attempt to deliver triple the daily returns of the widely followed Industrials Select Sector Index, which allocatesa healthy percentage of its weightto aerospace and defense stocks. 

Top holdings in this index include General Electric Company (NYSE: GE) (8.66 percent), 3M CO (NYSE: MMM) (5.51 percent), Boeing (5.01 percent), Honeywell International Inc (NYSE: HON) (4.88 percent), and Union Pacific Corporation (NYSE: UNP) (4.58 percent).

The other new broad sector play could be a play for traders willing to bet no more interest rates hikes are coming, at least not for a while. The Direxion Daily Utilities Bull 3X Shares (NYSE: UTSL) will look to deliver triple the daily returns of the Utilities Select Sector Index, whose biggest holdings include NextEra Energy Inc (NYSE: NEE) (9.62 percent), Duke Energy Corp (NYSE: DUK) (8.21 percent), Southern Co (NYSE: SC) (7.61 percent), Dominion Resources, Inc. (NYSE: D) (7.5 percent), and PG&E Corporation (NYSE: PCG) (5.24 percent). 

UTSL is a more levered, bull counterpart to the Direxion Daily Utilities Bear 1x Shares (NYSE: UTLZ), which Direxion launched earlier this year. 

Keeping with the industrial theme, Direxion also introduced theDirexion Daily Transportation Bull 3X Shares (NYSE: TPOR). The Direxion Daily Transportation Bull 3X Shares will seek triple the daily returns of the famous Dow Jones Transportation Average. Top holdings in the index include FedEx Corporation (NYSE: FDX) (12.64 percent), Norfolk Southern Corp. (NYSE: NSC) (7.87 percent), Union Pacific (7.5 percent), United Parcel Service, Inc. (NYSE: UPS) class B shares (7.16 percent), and Kansas City Southern (NYSE: KSU) (6.01 percent). 

Will There Be A Border Wall?

Depending on the answer to that question, there's the new Direxion Daily MSCI Mexico Bull 3X Shares(NYSE: MEXX), which will seek triple the daily returns of the MSCI Mexico IMI 25/50 Index. MEXX is Direxion's third triple-leveraged bullish Latin America ETF, and includes exposure to the country's telecom, consumer banking, and beverage industries. 

How To Use These ETFs

It should be noted that all of these funds include the word "daily" in their name. They're meant to deliver returns over the course of a given day, and not over a time horizon any longer than that. All leveraged ETFs make use of swaps and derivatives to accomplish their stated objective, making them harmful to be held over the long term. 

Image credit: Wikimedia Commons


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