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The Russell 2000 has now lagged the broader market for many years. Small-cap stocks tend to perform well during periods of lower interest rates and economic expansion.
Optimistic ceasefire developments have driven equities higher and shifted markets into a risk-on mode. Investors can consider leveraged ETFs to amplify upside exposure.
Direxion Daily S&P 500 Bull 2X Shares (NYSEARCA:SPUU - Get Free Report) saw a significant growth in short interest in March. As of March 13th, there was short interest totaling 61,955 shares, a growth of 1,955.6% from the February 26th total of 3,014 shares. Currently, 5.0% of the shares of the company are short sold.
Most investors end up less than happy with their decision to utilize them.
The Direxion Daily S&P 500 Bull 2X Shares ETF aims to deliver twice the daily return of the S&P 500 Index. SPUU and other leveraged ETFs experience "drift" or decay, especially in volatile or sideways markets, eroding long-term returns. Historical data shows SPUU outperforms in bull markets but suffers significant capital erosion during choppy periods due to negative drift.
The Direxion Daily S&P 500 Bull 2X Shares ETF offers profitable swing trading in bull markets, but its 2X leverage causes performance drift and decay, especially in volatile or sideways markets. Leveraged ETF decay is mainly due to beta-slippage, with higher leverage and volatility increasing the negative drift over time. SPUU's historical and simulated returns show that long-term outperformance over SPY is minimal, with significant drawdowns and persistent negative drift.
Leveraged ETFs like Direxion Daily S&P 500 Bull 2X Shares ETF (SPUU) can be profitable in trending markets but suffer from beta-slippage. This article reports the drifts of 22 leveraged ETFs. Those in semiconductors show particularly large decays. SPUU's 12-month drift has been almost continuously negative since January 2022, highlighting its risk as a long-term holding.
To put it mildly, it's been a very good couple of years for the S&P. Following a tepid 2022, the banner S&P 500 index has accelerated growth from 2023 into 2024.