It’s been a year since Donald Trump came into power and his administration led to a boom in the stock market, pushing major indices to multiple highs on several occasions. The S&P 500 rose 21.6%, Dow Jones climbed 28.5% and the Nasdaq Composite Index soared 30.3% since Election Day. Per Goldman Sachs, Trump’s post-election stock market jump is the fourth largest since 1936.
The rally was driven by the expectation that Trump will enact policies that will boost economic growth andcorporate profits, cut taxes, slash regulations, increase spending and inflation although his agenda is facing severe political gridlock. Trump promised to double the pace of economic growth from 2%, create 25 million jobs over 10 years, and make the U.S. economy the strongest in the world.
Funds in the United States have also enjoyed strong inflows led by equities, since Trump won the presidential elections a year ago. Total net assets under management of U.S. mutual funds including ETFs surged 16% to $21.1 trillion over the one-year period ended Sep 30, according to data from Thomson Reuters. About $11.4 trillion comes from equity funds.
While almost every corner of the stock market is celebrating Trump’s one-year anniversary, leveraged ETFs have piled up abnormal returns post-election. Leveraged products create a leveraged (i.e 2x or 3x) long position in the underlying index through the use of swaps, options, futures contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a very short period of time provided the trend remains a friend.
However, these funds run the risk of huge losses compared to traditional funds in fluctuating or erratic markets. Further, their performance could vary significantly from the actual performance of their underlying index over a longer period when compared with a shorter period (such as weeks or months).
Below, we have highlighted five ETFs that will continue to be investors’ darlings in Trump’s administration.