With April seeing major indexes bounce back after one of the most tumultuous periods in market history, one would be forgiven for thinking an economic recovery is imminent. Volatility abated in April, earnings reports have thus far largely met or exceeded (admittedly low) expectations, and the S&P 500 just returned its best month since October 1974.
The rally is a familiar tune to anyone who’s paid attention to the last decade: once again, tech has led the way. Technology-focused indexes like the S&P’s Technology Select Sector Index or the Dow Jones Internet Composite Index have surged roughly 30% from their recent lows over the past month.
But even within the much-trusted tech sector, there are trends to be found. Not all technology companies have rebounded equally. Direxion’s top-performing tech ETFs over the past month show how this is true.
Direxion Daily Technology Bull 3X Shares (TECL)
Higher by 120% from the lows it hit late in March, the Direxion Daily Technology Bull 3X Shares (TECL) is the third-best performer of Direxion’s tech ETFs, benefitting from increased interest in many of the same growth stocks that have supported the market in the past. This includes Apple and Microsoft, which are both higher by more than 30% from their recent lows.
However, looking at TECL’s top-performing components over the course of the past few weeks reveals that much of the ETFs momentum has actually been built on the back of financial technology companies. This includes blue-chip stocks like Mastercard and Visa, which are both off of their lows by about 30%, and companies like Intuit and Paypal, which have both gained as much as 45% from their recent lows. In Paypal’s case, the stock has surged back to new all-time highs.
Of course, there is a whole segment of TECL that we’ve neglected, which leads to the second-best performing tech industry ETF.
Direxion Daily Semiconductor Bull 3X Shares (SOXL)
That segment is, of course, the semiconductor industry, which has seen some of the best post-crash performance throughout the entire U.S. equity market. The 133% increase in the Direxion Daily Semiconductor Bull 3X Shares (SOXL) ETF is reflective of this outperformance.
Again, many of the leaders within the industry are those that have led the market previously. Chief among these are Advanced Micro Devices (up 47% from its March low), NVIDIA (up 65%), and Apple-supplier Broadcom (up 78%).
The financial strength of these component companies seems likely to remain robust so long as their patrons in the tech field also remain in demand. But even the high-flying semis have been outshined in the last month by another area of tech.
Direxion Daily Dow Jones Internet Bull 3X Shares (WEBL)
Finally, Direxion’s top-performing tech ETF is intuitively composed mainly of companies that have benefitted from the necessities of the global pandemic and social distancing. The Direxion Daily Dow Jones Internet Bull 3X Shares (WEBL) has surged 172% since mid-March, thanks in large part to increased interest in online software and streaming services that help close the distance people are being compelled to keep.
The array of companies with large percentage moves is fairly diverse, including e-commerce names like eBay and Etsy, up 50% and 110%, respectively, as well as cloud-computing firms such as Okta and Vonage, up by 75% and 95%, respectively.
However, despite the high relative performance of these stocks, a lot of the dominant performance in the segment can be traced back to large-cap tech. Specifically, Amazon, which went from being at a 52-week low to a new all-time high in a matter of weeks, and Netflix which also made a new all-time high in April.
All indications are that we are heading for the worst economic year since The Great Depression. But that hasn’t stopped investors from looking ahead. So while a lot may still be uncertain about the shape of an economic recovery, traders are seemingly sure that technology will be the sector to lead the market higher.
Related Leveraged ETFs:
TECL as of 3/31/2020
SOXL as of 3/31/2020
WEBL as of 3/31/2020
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.
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