Leveraged ETFs Soar As Investors Seek 'Amplified Exposure And Quicker Returns:' Rate Bets, Tech Mania, And Geopolitical Shifts Drive Demand

Leveraged exchange-traded funds have been experiencing a significant surge in investor interest lately. This is fueled by a confluence of factors ranging from anticipated interest rate cuts to the booming popularity of artificial intelligence and escalating geopolitical tensions.

What Happened: This growing appetite is driving substantial capital inflows into vehicles like ProShares UltraPro QQQ (NASDAQ:TQQQ), Direxion Daily Semiconductor Bull 3X (NYSE:SOXL), and Select STOXX Europe Aerospace & Defense ETF (BATS:EUAD).

“From interest rate speculation to momentum chasing, investors are rapidly reallocating capital toward vehicles that offer amplified exposure — and quicker returns,” said Eugenia Mykuliak, the founder and executive director of B2PRIME Group, a global financial services provider for institutional and professional clients.

Mykuliak stated the following factors that are responsible for investors’ growing interest in such leveraged ETFs.

• Anticipation of interest rate cuts is fueling leveraged ETF demand.
• Leveraged ETFs as a tool to magnify gains in resilient markets.
• Strategic hedging with leveraged ETFs amid tech strength.
• Risk-on sentiment and momentum chasing are driving inflows.
• Speculative nature and short-term focus in leveraged ETF trading.
• AI boom attracting capital to leveraged ETFs with tech exposure.
• Geopolitical tensions boosting the defense sector leveraged ETF interest.

Here’s a list of leveraged ETFs and how they have performed.

Leveraged ETFs	Last Five Days	YTD
ProShares UltraPro QQQ (NASDAQ:TQQQ)	10.14%	-24.42%
Direxion Daily Semiconductor Bull 3X (NYSE:SOXL)	9.47%	-51.97%
Select STOXX Europe Aerospace & Defense ETF (BATS:EUAD)	6.42%	50.78%

See Also: S&P 500’s 9-Day Climb Not A Recession Signal, Argue Analysts Amid Conflicting Research: ‘Simply Wrong/Lazy Analysis’

Why It Matters: According to Mykuliak, the current market sentiment, characterized by a “risk-on behaviour,” is a significant driver.

She cautions about the speculative nature of some of these investments. “Short-term mindset is typically about speculation because positions are held for days, not months. So, chasing short-term profits is a speculative approach per se. The rising activity around options and other derivatives of these ETFs could also signal speculative positioning, rather than long-term strategic preparation.”

Price Action: The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, fell in premarket on Monday. The SPY was down 0.74% to $562.59, while the QQQ declined 0.89% to $484.50, according to Benzinga Pro data.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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