The introduction of the Direxion Daily Cloud Computing Bear 2X Shares (CLDL) at the beginning of the year was auspicious timing given the strength in big tech during the pandemic, and so far the fund is up 15% in 2021.
CLDL seeks 200% of the inverse (or opposite) of the daily performance of the Indxx USA Cloud Computing Index. The fund, under normal circumstances, invests in swap agreements, futures contracts, short positions, or other financial instruments that, in combination, provide inverse (opposite) or short leveraged exposure to the index equal to at least 80% of the fund’s net assets (plus borrowing for investment purposes).
In today’s market environs, it’s been something of an arms race between big tech firms to see who can develop the best cloud computing platform. Household market names like Amazon and Google are leveraging the strength of cloud computing, and that only proliferated during the pandemic amid social distancing measures.
“Amazon, Google and Microsoft are dominating the space and it seems unlikely that there is room for anyone else,” a CMS Wire article noted. “In fact, data from the Synergy Research Group published in January shows that the total number of large data centers operated by hyperscale providers increased to 597 at the end of 2020, having more than doubled since the end of 2015.”
Cloud Computing Set to Transform Banking
The banking industry is one that is set to undergo its own cloud computing transformation. Gone are the days of stuffy banks resistant to change as they are now implementing cloud computing as part of their core business operations.
“Among banking activities, one of the biggest areas of opportunity for cloud computing is risk management, both for financial risks (such as credit, market, and liquidity) and nonfinancial risks (cybersecurity, fraud, financial crime),” a McKinsey article said. “At a time when risk management leaders are being asked to process greater amounts of data in shorter amounts of time—often amid budget and staff constraints—cloud computing could unlock considerable benefits. It can help risk teams react rapidly to changes in the external environment and dive deeper into the analytics life cycle (exhibit) to better understand the drivers of risk, all without major capital expenditures.”
One way to trade this move is the Direxion Daily Financial Bull 3X ETF (FAS), which seeks daily investment results of 300% of the daily performance of the Russell 1000 Financial Services Index. The index is a subset of the Russell 1000® Index, which measures the performance of the securities classified in the financial services sector of the large-capitalization U.S. equity market.
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